A company acquired security dogs, what's the accounting treatment?

The main question is that if a company acquired security dogs for 3 million Naira, what would be the accounting treatment? An asset or an expense? While the answer is quite straightforward, we would like to expand it to explain why it should be treated in a particular way.

When asked, a chartered accountant categorically states that the accounting treatment is an asset. However, a further question was raised. What if the company materiality threshold is higher than 3 million Naira, can the item be treated as an expense? It was made clear that it is not a matter of materiality but rather the purpose of the transaction. Because the goal is to secure the entity's cash inflow, the security dogs should be tagged as assets.

The fact is, this transaction is an asset. And in my opinion, it should be treated as such. Also for large entities with higher materiality levels, these items should be treated as assets as well. It doesn't matter if it is material or not. The reason is explained below:

According to the IFRS Framework, assets are items that have the potential to bring economic benefits to the entity. Thereby increasing the company's cash inflow. The term “potential” signifies that it does not necessarily bring in cash to the entity but may ensure that the economic benefits come to the entity. For example, the motor van used to transport goods to customers doesn't bring economic benefits on its own but ensures that the items that will result in economic benefits are intact.

This is also true with security dogs. The goal is to secure the company's assets including its inventories. And it is the inventories that will be sold to earn economic benefits. Therefore, it should be treated as an asset and not an expense in the books of accounts of the company.