Final answer:
The standard rule for evaluating safeguards is that the annual cost of safeguards should be less than the expected annual cost of asset loss, ensuring spending on protection is economically justified in relation to the value of the asset and potential risks.
Step-by-step explanation:
When evaluating safeguards for assets, a fundamental principle is that the cost of the safeguards should be reasonable in relation to the potential risk and cost of asset loss. Therefore, the rule that is most commonly followed is that: The annual costs of safeguards should not exceed the expected annual cost of asset loss. This is because the amount spent on protection should not overshadow the value it aims to secure. Extrapolating from insurance principles, while there may be investment income earned on reserves, administrative costs, or variability due to different risk groups, the foundational idea is that the average contributions must cover claims, operational costs, and provide some profit margin. So, when allocating resources to protect assets, consideration is given not just to the asset's value, but also to the balancing act between potential loss and excessive spending on its protection.