Identified asset and substitution right

An identified asset is specified property, plant, or equipment that the supplier cannot replace through a substantive substitution right. An asset can be named explicitly, such as by serial number, or identified implicitly when it becomes available for use.

Test ability and benefit together

A substitution right is substantive only when the supplier can replace the asset throughout the period of use and would benefit economically from replacement. Consider the location of substitute assets, downtime, transport and installation costs, customer approval rights, and whether replacement would improve the supplier's economics. A right that applies only after breakdown or for maintenance is usually protective.

For example, a supplier promises a specified production line in one factory bay. It owns no available replacement at that site, and moving another line would cost more than the expected benefit. A serial number alone does not settle the test, but these facts support an identified asset. In contrast, a supplier may control which truck serves a route when it can freely use an available fleet and benefit from switching vehicles.

This test concerns asset identification. Economic benefits and direction of use remain separate control questions. Read ASC 842-10-15-9 through 15-10 and the substitution guidance in ASC 842-10-15-11.