Chapter 9: Intangible Assets

Question 1

1. Intangible assets are governed by which accounting standard?
2. Define an intangible asset.

Answer 1

1. IAS38

2. An intangible asset is an identifiable non-monetary asset.

Question 2

What are the needed characteristics of an intangible assets? (3)

Answer 2

• Resource controlled by the entity through past events expected to bring future economic benefit.
• Lacks physical substance
• Identifiable and separately distinguishable from goodwill.

Question 3

1. Define research. Where is this posted? Why?

2. Define development. Where is this posted? Why?

Answer 3

1. Research is planned investigation taken with the hopes of gaining new knowledge/better understanding.

Posted to profit and loss as an expense because there is no direct link to profit so matching concept cannot be applied.

2. Development is the application of research findings to improve a part of a product or service.

Capitalise if they meet the PIRATE criteria

Question 4

PIRATE

Answer 4

Probable inflow of economic benefit
Intention to complete
Reliably measured
Adequate resources to complete
Technically feasible
Expected to be profitable

Question 5

1. How do you amortise an intangible asset with a finite useful life?
2. Which method do you use if there is no clear pattern of economic benefit of the asset?
3. How do you amortise an intangible asset with an infinite useful life?

Answer 5

1. You begin to amortise when commercial exploitation begins.
2. Straight-line.
3. You don’t - it is instead subject to annual impairment review.

Question 6

1. When can an intangible asset be measured at fair value?

2. IAS38 disclosure requirements (3)

Answer 6

1. When the good is homogeneous.
2. amortisation method used
   amortisation charge for period
   reconciliation at beginning and year end