The elements of financial statements as per the AASB Framework are assets, liabilities, expenses, income and equity.

Assuming each of the following scenarios is material, use the AASB Framework to justify if the items meet any of the definition of assets, liabilities, equity, income or expenses. Provide the reason(s) for your view with reference to the definition criteria for the elements of the financial statements.

Aero Ltd operates an airplane building business and is considering the following three scenarios for the year ending 30 June 2021:

1. Aero Ltd has bought some equipment and is ready to install it in its current fleet of planes. An unexpected technological announcement in the market means that the newly developed equipment is technologically obsolete, can no longer be used and has no scrap value.

2. Aero Ltd acquired a warehouse twenty years ago. The warehouse has not been used for the past five years and currently has a nil carrying amount. Aero Ltd is planning on storing some equipment in that warehouse for the next nine months.

3. Aero Ltd took a loan of $2.5million from a private lender and currently has a remaining debt amount of $25,000. The private lender has sent a format letter to Aero Ltd stating that they are happy to scrap the $25,000.

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