Chapter 6 Flashcards
IAS38 defines intangible assets as…
An identifiable, non - monetary asset without physical substance
What are the recognition criteria of intangible assets
Probable that future economic benefit will flow to the company
The cost of the asset can be measured reliably
Why is it difficult to qualify internally generated intangible assets for recognition?
Problems of establishing if there is an identifiable asset which will generate economic benefit
Problems of determining cost of the asset reliably
What is the research phase?
An original and planned investigation undertaken with the prospect of gaining scientific or technical knowledge and understanding
What is the development phase?
The application of research findings or other knowledge to a plan or design for the production of new or substantially improved products etc. before the start of commercial production or use
Which phase (R&D) can be recognised
Research can not be recognised because of the uncertainty of future economic benefit therefore research costs are written off as an expense.
Some costs of the development phase can be recognised, however it must meet strict criteria to do so.
When can development costs be capitalised?
Only when all criteria is met at the time of being incurred. Otherwise it will be written off as an expense and cant be capitalised at a later date
What happens to gains through revalue of intangible assets?
When an intangible asset is sold any revaluation reserves may be transferred to retained earnings to represent the gains being realised.
Under IFRS3 Business Combinations what happens to negative goodwill?
After the fair value is checked again and the goodwill is still negative, this goodwill should be treated as income and included in the income statement
