9. Intangible Assets

Question 1

Intangible assets definition requirements

Answer 1

1. Capable of separate disposal
2. Arising from contractual rights or other legal rights

e.g. patents
copyrights
licences
franchises
trademarks
brand names

Question 2

Intangibles: Is internally generated goodwill an intangible asset?

Answer 2

No

(Because can’t be disposed of individually)

Question 3

Intangibles: Are employee’s knowledge/skills an intangible?

Answer 3

No

Question 4

Intangibles: Future economic benefits definition

Answer 4

Revenues

or

Cost savings

Question 5

IAS v conceptual framework future economic benefits difference

Answer 5

IAS: Must be expected
CF: Potential

Question 6

IAS: When should asset be recognized?

Answer 6

1. Probable future economic benefits
2. Cost can be reliably measured

Question 7

Company purchases intangible asset: Cost

Answer 7

Price paid

Question 8

Intangibles: Research expenditure: Treatment

Answer 8

P&L expense

(Not intangible)

Question 9

Intangibles: Development costs: Treatment

Answer 9

Capitalized IF ALL OF: (And then all costs must be capitalized e.g. depn)

1. Completion of asset technically feasible
2. Asset can be used/sold
3. Asset will generate future economic benefits
4. Adequate resource to complete asset
5. Expenditure on asset can be measured reliably

Question 10

Intangibles: Can written-off development expenditure be capitalized if conditions subsequently met?

Answer 10

No

Question 11

Intangibles: Other internally generated assets

e.g. internally generated brands

Answer 11

NOT capitalized

(Because cost cannot be separately identified)

Question 12

Intangibles: Acquired on acquisition : Recognition

Answer 12

Initially at fair value

Question 13

Intangibles: Initial measurement

Answer 13

Cost
PLUS
Directly attributable costs
e.g. legal fees

Question 14

Intangibles: Subsequent measurement: Valued at?

Answer 14

EITHER

1. Cost
2. Revalued amount

Accum amort and impairment losses

Question 15

When can intangibles ONLY be revalued?

Answer 15

If fair value can be determined
By reference to an active market

Question 16

Intangibles: Active market definition

Answer 16

1. Homogeneous items
2. Buyers and sellers found at any time
3. Prices publicly available

e.g. some licences/quotas

Question 17

Intangibles: What to do if item revalued?

Answer 17

ALL assets of that class should be revalued

Question 18

Amortization: When a finite useful life

Answer 18

Amortize over useful life
(From when asset is available for use)

Question 19

Amortization: Finite life: Development expenditure: When is it available for use?

Answer 19

When commercial production of the product being developed begins

Question 20

Amortization: Finite useful life: What is the residual value?

Answer 20

Zero

UNLESS

1. 3rd party agreed to buy asset at end of useful life
2. Active 2nd hand market which can be used to measure the residual value

Question 21

Intangibles: Indefinite useful life: Amortization treatment

Answer 21

Don’t amortize

Test for impairment annually

(IF then has useful life, start amortizing)

Question 22

Intangibles: How to recognize disposals

Answer 22

Profit/loss calculated on disposal:

Proceeds
MINUS
Carrying amount

Question 23

Intangibles: Disclosures:

Answer 23

Same as PPE

AND

1. If asset has finite or indefinite UL
   a. If indefinite: CA and why indefinite
2. If material, individual assets
3. Amount of R&D expenses

Question 24

Intangibles: Development costs: UK GAAP difference

Answer 24

CHOICE

Between capitalization and expense

Question 25

Intangibles: Useful life: UK GAAP difference

Answer 25

Rebuttable presumption
that
No intangible will have a useful life over 10y