(2) Control - the ability of the entity to control the resource and restrict the access of others to the benefits deriving from it (Sections 13-16 of Standard 30);
(3) Future economic benefits - a reasonable expectation that future economic benefits will flow to the entity (section 17 of Standard 30).
In the absence of cumulative fulfillment of these conditions, the item should not be recognized as an asset on the balance sheet, and should be recorded as an expense.
- The corresponding international standard IAS 38 defines an "intangible asset" as: "a non-monetary asset, identifiable, lacking physical essence" (ibid., in section 8), and states that:
"An intangible asset shall be recognized, if and only if:
(a) it is expected (probable) that the foreseeable future economic benefits that it will give to the Throne will flow to the entity; and
(b) the cost of the asset can be reliably measured" (IAS 38, Article 21).
- Standard 30 also emphasizes the element of control, according to which the entity must have "the power to obtain the future economic benefits flowing from the underlying resource (underlying) and to restrict the access of others to these benefits" (ibid., at section 13). In our case, in view of the arguments raised, along with the lack of a contractual right and the reliance on the expectation of trust, the question arises as to whether the elements of identification and control required for recognition of the asset are satisfied.
- As for IFRS 15, while Section 91 of this Standard states that "an entity shall recognize as an asset the additional costs of obtaining a contract with a customer if the entity expects to reimburse these costs", while Section 93 provides that: "Costs for obtaining a contract that would arise regardless of whether the contract was obtained will be recognized as an expense at the time they arise". However, it seems that these provisions presuppose the existence of a contract with a client or a high certainty of its attainment, and deal mainly with timing and cost capitalization. Therefore, in the absence of a contract, and in the circumstances at hand, in which the very existence of an alleged asset is disputed and the discussion focuses on the question of control and identification of a resource, IFRS 15 constitutes only a supplementary framework, and does not serve as a starting point for analysis.
- Therefore, the correct framework for examining the issue is first and foremost the conceptual framework, Standard 30 and IAS 38, and only after this examination, and to the extent that it is found that a recognizable asset exists, can it be resorted to a secondary examination under IFRS 15 regarding the possibility of cost capitalization.
- And now for the definition of the alleged "resource". The aforementioned standards, and in particular Standard 30, relate to an economic resource. Therefore, it is necessary to define what is the "resource" claimed in our case regarding the payments to the growers: whether it is a supplier relationship, the trust of the growers or perhaps a future right. Throughout its summaries, the defendant presented varying descriptions of the nature of the "resource" for which the payments to the growers were recorded as an asset: sometimes it was claimed that these were costs for obtaining contracts (inter alia, in paragraph 82 of the defendant's summaries; the affidavit of CPA Gottlieb at paragraph 150); Sometimes it is claimed that these are advances to suppliers. Thus in paragraph 86 of the defendant's summaries:
"... In contrast to the present case, in which we are dealing with an advance payment to the supplier, which will be cleared in the goods that will be supplied."