F2 - 11. Intangible Assets Flashcards
What is an intangible asset?
An identifiable (separable and arising from contractual rights), non monetary asset without physical substance
What are the 4 most common examples of intangible assets?
- Patents
- Software
- Brands
- Customer lists
What are the 2 conditions for an intangible asset to be recognised?
- Probable that future economic benefit is to be received
2. The cost of the asset can be measured reliably
Can internally generated intangibles be shown on the SFP?
No, as the ‘cost’ cannot be reliably measured
Can advertising costs be recognised as intangible assets?
No, as there is no guarantee that future economic benefit will arise. They must be expensed.
How are intangible assets purchased separately recognised on the SFP?
At cost, amortised over their useful life
How are intangible assets acquired in a business combination recognised on the SFP?
At fair value IF they are separable
What are research costs?
Costs incurred to gain new scientific or technical knowledge and understanding
What is the accounting treatment for research costs?
Expensed to the P&L
What are development costs?
Costs incurred in the application of research findings to a plan/design for the production of new or substantially improved products or processes, prior to commercial production or use
What is the accounting treatment for development costs?
Capitalise to the SFP and amortise over their useful life
What are the 6 conditions that development expenditure must meet?
- Probable future economic benefit
- Intention to complete
- Resources available to complete
- Ability to use/sell
- Technically feasible to complete
- Expenditure can be measured reliably
What 2 ways can intangible assets be measured?
- Cost model (Cost less accumulated amortisation and impairments)
- Revaluation model (reval against an active market, regularly)
What is amortisation?
Depreciation of an intangible asset, where residual value is often zero and amortisation begins when the asset is available for use
What are the 2 conditions for derecognition of an intangible asset?
- On disposal
2. Where no future economic benefits are expected
