Accounting For Other Assets (7)

Question 1

What criteria must an asset be to be considered as an intangible asset?

Answer 1

1) be an identifiable non-monetary asset with no physical substance
2) be probable that the expected future economic benefits attributed to the asset will flow to the entity
3) the cost of the asset can be measured reliably

Question 2

What does the initial measurement of an asset cover?

Answer 2

Cost plus any directly attributable me costs.

Question 3

ISA 38 treats what two things as distinct items?

Answer 3

Research and development

Question 4

Can research be capitalised and why?

Answer 4

No it must be expensed because it cannot be certain that the project will generate any future economic benefit

Question 5

Can development costs be capitalised and why?

Answer 5

Yes if it meets PIRATE criteria because it is the application of initial research to plan or design the production of new or substantially improved item prior to the start of commercial production or use.

Question 6

What criteria must development meet to be capitalised?

Answer 6

Probable me future economic benefits will be generated by the asset
Intention to complete and use/sell asset
Resources adequate and available to complete and use/sell asset
Ability to use/sell the asset
Technical feasibility of completing asset for use/sale
Expenditure can be measured reliably