Definition of an Asset: Value in Use, goodwill and the missing part of the definition.

Paragraph 49 of the AASB's Framework has the definition of an asset there, and the exchangeability/severability requirement isn't there. 

Basically the exchangeability means that if you can't cut (sever) the "asset" off from the rest of firm and sell it, then the firm can't really use it to it's full potential.  If the firm can't use the "asset", then it's not really an asset of firm, but rather an asset of the shareholders. Specifically, we are talking about goodwill.

I personally believe that the exchangeability isn't a bad criteria because if the firm can't sell it, then it is questionable if the firm can really use it. In this sense, the goodwill is really an asset of the SHAREHOLDERS and not of the Firm itself.  This is a really proprietary view concept, because the entity doesn't really have "control" over the economic benefit of goodwill.  To me, one part of "control" is the right to sell it off.

The counter argument is that goodwill DOES have "value in use", and firms CAN control or influence how it's used. For example, when Coca Cola makes Coke Zero, they carry across all the like branding to the new business venture so the customer goodwill (customers positive feelings towards the brand) is also carried across to the success of the new venture. Surely the Virgin group would not be so heavy into painting everything red, but for the benefit of transferring and "using" the "retained customer goodwill".

Again: I'm not convinced it's an asset because the measurement of "goodwill" is reliable, but doesn't really measurer what it's supposed to measure.  Ultimately, goodwill is accounting talk for "I don't know what the hell that is, but it's a something debit".  In other words, the measurement of goodwill is not direct, nor is it derived, it's just by fiat.  If goodwill was truly "customer loyalty, brand names, business synergies, etc" then goodwill by definition would be equal to the difference between the share market and accounting values.

= Goodwill

= totalFrimMarketValue - netAssets@BookValues

= mktSharePrice * numberOfSharesIssued - totalAssets + lotalLiabilities

Please note that this is JUST MY OWN PERSONAL interpretation. It wasn't part of any examination question that I have set or will set. The important thing is this central idea that if you can't cut it off and sell it for cash, then that is cash that you really don't have.