FR - Intangible asset Flashcards
Explain what an Intangible asset is
- Nonmonetary asset without physical substance.
- Item generates future value of the entity, but the value comes from right/ privilege they provide to entity
Ex. Copy right trademark, patent, franchise right, license , customer list
What is the Handbook section to be used for IFRS & ASPE for intangible asset
IFRS - IAS 38
ASPE - 3064
Provide the criteria that are to be met to recognize for intangible asset
- The asset is identifiable, which is either
a. Being separable such that it can be transferred/ sold to another entity
b. Arising from contractual or other legal entity - Entity controls future economic benefit of the asset
- Asset will generate future economic benefit
Provide the initial measurement of the intangible asset
- It is probable that the expected economic benefit of the asset to the entity
- If cost can be reliably measured
- Normally expected that asset will generate future economic benefit by very fact that they purchase it
Explain what is internally generated intangible asset
- It can be more difficult to to reliably measure cost
- Include new technology that the company has created to arrive
- Expenditure related to development cost of internally generated intangible assets can be capitalized IAS 38.63
What are the two phrases of internally generated intangible asset
- Research
- Earlier stages in process where the entity is still doing a lot of exploring
- Cost are expensed - Development
- Entity has moved from state looking for the potential option to focus work on a specific objective that plans to have an economic benefit
Criteria are: - Is the asset technically able to be completed
- Does the entity plan to complete it
- Once completed, does the entity have use for the asset
- When asset is in use, will generate economic benefit
- Availability of adequate, technical, financial and other resources to complete development and use to sell
- It’s the ability to measure reliably the expenditure attributable to intangible assets during development
What can be capitalized if the development phase criteria are met
- Design, construction, testing prototypes
- Design tool, jugs, moulds involve technology
- Design construction of the pilot plant that is not of scale
- Chosen alternative for new improved material
- Not capitalized - Selling/administration, identified inefficiencies and operating losses incurred, training staff
Explain how the acquired parts of intangible asset are recognized through business combination
For IFRS 3 - intangible asset are recorded separately to goodwill
Goodwill - asset representing the future economic benefit arising from other asset of acquired in business combination that are not individual identified and separately recognized
- Can only be recognized as business combination
Internally generated goodwill - never recognized in F/S
If recorded through grant - still the value is the government grant, record the asst and the grant at FV initially
Provide the subsequent measures of intangible asset
The asset has to determine the useful life of the asset
1. Indefinite life - applicable for assets that will continue to generate cash flow
- However, each year, need to determine impairment
Finite life - amortized over the useful life
What are the two models are used to determine the value of intangible asset
- Cost model
- Intangible asset carried cost less accumulated deprec. an impairment loss
- Determine by expected usage by limited or contractual right - Revaluation model
- Requires that intangible asset be valued at FV less accumulated amortization and impairment loss
IAS 38
What handbook secong under IFRS is used for impairment of intangible asset
IAS 36
How is derecognition recorded for impairment
- Intangible asset is derecognized when disposal of economic benefit can no longer be derived from use or disposal
What is the difference between IFRS and ASPE
ASPE 3064 - capitalization of development cost is the same for IFRS
-ASPE does not have specific guidance regarding intangible asset obtained by government grant
