You are the assistant to the Financial Director of TreesRUs Plc who primarily provide forestry and landscaping services to large organisations. The Financial Director has recently been appointed and he is considering the accounting treatment of certain transactions.

Specifically, he has noted the following transactions during December 20X9:

1. Private Hospital Donation

TreesRUs has given a 150,000 donation towards the cost of a new private hospital in the nearby town. The hospital has extensive grounds and the donation has been given following a verbal promise by the Hospitals Operations Director that all landscaping services and garden maintenance work will be given to TreesRUs over the next three years. However, there is no signed contract in place. TreesRUs have estimated that if they are awarded this work they could possibly achieve profits of approximately 200,000 per year.

2. Managing Director Contract

TreesRUs has signed a contract to pay its managing director 400,000 per annum for the next three years. He has agreed to work full time for the company over that period.

3. Free Lawnmowers

TreesRUs took delivery of four ride-on lawnmowers for free. The typical trade price of these lawnmowers would be 3,000 each. They were given these lawnmowers for nothing on the agreement that TreesRUs would provide gardening services to the suppliers Headquarters over the next couple of months. Completion of this task will mean that no cash need be paid for the lawnmowers.

REQUIRED:

a) The definition of an asset contains the following key phrases:

• economic resource
• controlled by an entity
• past events

Explain your understanding of the meaning and scope of these phrases.