7. Intangible Assets Flashcards
Define Intaginble assets
An identifiable non monetary asset without physical substance
Define monetary asset
Money helf and assets to be recieved in fixed or to be recieved in ficxed or determinable amount of money
When is an asset identifiable
Either it is
- Separable: capable of being divided from the entity and sold/transferred
- Arises from contractual or other legal rights
When can intagible asset be recognised in statements
- Meets the definition of an intaginble asset
- Meets recignition criteria
What is the recognition criteria
- Probable entity will recieve future economic benefits
- cost of asset can be measured reliably
What are the categories of intangible assets
- Acquired separately
- Acquired as part of a business combination
- Internally generated
How is acquired separately intangible assets recoginised
Recognise as intangible asset
- Debit Int Asset
- Credit Cash
How is intangible assets acquired as part of a business combination recognised
Recognise as an intangible asset separately from goodwill in the group accounts
Define Business combination
A transaction or other event in which an acquireer obtains control of one or more businesses
Define Goodwill
An Entity’s value over and above its recorded value
Often referred to as the reputation of the business
What are the two types of goodwill
Internally generated goodwill: not identifiable as separate or measured reliably so cannot be intangible asset
Goodwill from business combination: recognise as intangibel asset
What are the two types of expenditure for internally generated asset
Research Phase: Not recognised as an intangible asset
Devlopment Phase: Can be recognised depending on criteria
Define Research Phase
Original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge or understanding
Define Development Phase
Application of research findings to a plan or design for production or substantially inmproved materals, products, processes etc before the start of commercial production
When can Developemental phase be capitalised as intangible asset
If it meets all of the PIRATE criteria
P: Probable future economic benefit
I: Intention to complete and use
R: Resources adequate to complete asset
A: Ability to use/sell
T: Technical feasibility of completing asset
E: Expenditure can be measured reliable
Which internally generated items are explicitly prohibited by IAS 38 to be recognised as intangible asset
Brands
Mastheads
Publishing titles
Customer Lists
When is intangible asset measured at fair value at initial measurement
When acquired as part of a business combination
At the price that would be recieved to sell the asset in the market
What is the initial measurement of intangible aasset acquired separately
Measured at Cost=
- Purchase Price ( import duties, non refundable taxes, deduct discounts or rebates)
- Any directly attributable costs(eg.testing)
How are intangible assets whicih are internally generated measured initially
-Measure at cost:
- Sum of expenditure incurred from date asset first meets criteria
+ Directly attributable costs (eg.materials, employee benefits, patents etc)
Which models can be used for subsequent measurement of intangibel asset
Cost model: Cost less amortisation, impairment = carrying amount
Revaluation mode= Fair value less amortisation, impairment = carrying amount
Define active market
A market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis
What things can active markets do not exist for
Brands, mastheads, music/film publishing rights, patents, trademarks etc
What is the accounting entry for revaluation
Increase in value:
Debit Asset Carrying amount
Credit Revaluation surplus (in other comp income)
Decrease in value:
Debit Other comp income
Debit Profit or loss
Credit Asset
What are intangible assets amortised based on
Whether their useful life is Finite or Indefinite
What is the process of amortisation for finite useful life intangible assets
Amortise asset on systematic basis over useful life
- Recognise amortisation in P/L
- Usually no residual value
What is the process of amortisation for indifinte useful life intangible asset
Do not amortise asset
- Conduct impairemnet revies annually or when indication of impairement
What is the point of derecognition of intangible asset
On Disposal
or
When no future economic benefits are expected from its use
What is the accounting entry on disposal
Debit Cash
Credit Intangible Asset
Credit/Debit Profit or loss
What is accoutning entry for revaluaed intangible asset on disposal
Debit Revaluation Surplus
Credit Retained Earnings
