3 Accounting Policies In The Statement of concepts for General Purpose Financial Reporting published by the New Zealand Institute of Chartered Accountants, the following information is provided about Assets: 7.7 Assets are service potential or future economic benefits controlled by the entity as a result of past transactions or other past events. Essential Characteristics of Assets 7.8 The definition of assets identifies three essential characteristics: (a) there must be service potential or future economic benefits; and (b) the entity must have control over the service potential or future economic benefits to the extent that the entity is able to enjoy the benefits, and deny or regulate access of others to the benefits; and (c) the transaction or other event which gives rise to the entity's control over the service potential or future economic benefits must have occurred. Criteria for Recognition of Assets 7.9 An asset shall be recognised in the statement of financial position when and only when: (a) it is probable that the service potential or future economic benefits embodied in the asset will eventuate; and ( b) the asset possesses a cost or other value that can be measured with reliability. Required: (a) With reference to the above Asset-related information discuss the advantages and disadvantages of flexible accounting regulations versus rigidly specified accounting regulations. By way of examples, it would be useful for you to include coverage of issues such as research and development, goodwill, leased plant and machinery etc. (10 marks) ( b ) Choose one change of accounting policy that is considered to be a red flag item, define it and explain why it should put a financial analyst on his or her guard (5 marks) TOTAL: 15 MARKS