Background:

XYZ Properties Pty Ltd owns a commercial property in Eagles Nest situated in the Erehwon east coast. The property was acquired in 1990 at a cost of $1 million when Eagles Nest was a popular holiday destination and comprises a restaurant and a mini supermarket.

Since 2010, Eagles Nest has experienced a decline in holiday visitors and local businesses have struggled to survive. The restaurant closed in 2015 when the lease expired and the premises have remained unoccupied since then.

The supermarket closed in 2016 when the lease expired as it could not compete with a large supermarket which opened in a neighbouring village. The premises have remained unoccupied since then. The premises have been advertised by a local estate agent but attempts to find new tenants for both premises have been unsuccessful. The estate agent has indicated that there has been no interest in the two premises. Additionally, the estate agent has indicated that selling the property will be difficult given lack of success in finding tenants.

Required

a) Explain whether the commercial property meets the definition of an asset when applying the principles of the current Conceptual Framework.

b) Referring to the recognition criteria of an asset, explain whether the commercial property meets the recognition criteria of an asset when applying the principles of the current Conceptual Framework.

(ACCOUNTING THEORY )