IAS 38 - INTANGIBLE ASSETS Flashcards
what is the recognition criteria of purchased intangible assets?
1- must meet the 3 conditions of intangible asset
-no physical substance
-non monetary
-identifiable/ separable
2- must meet normal conditions
-cost can be measured reliably and
- must provide probable economic benefit
-in control of entity
what does IAS 38 say about recognition of internally generated intangible assets?
internally generated intangible assets like goodwill, brand, mastheads, publishing titles, customer lists can NOT be recognised.
-however other intangible asets like games developed can be recognised
what are the methods for measurement of an intangible asset that you purchased?
initially measure at cost
then u can use
a) cost model: cost less accumulated ammortization
b) revaluation model: only allowed if there is an active market. (internally generated softwares dont have active market)
what things are not allowed to be revalued according to IAS 38?
patents, trademarks, brand names, publishing rights, goodwill
what is an active market?
1- price is available to public
2-homogenous
what if an asset has indefinite life?
we test for impairment annually. more often if there is a hint.
also useful life assessment must be carried out yearly
what is the criteria that needs to be met to recognize development costs?
P- Probable chances of economic benefit
I- Intention to complete and use/sell it
R- resources available
A- ability to use or sell
T- technical feasibility
E- expenditure reliably measured
difference between research and development cost?
research is done in planning stage, to expand knowledge. it is written off in I/S.
development is when there is intention to complete, after decision is taken. they are capitalised after meeting PIRATE criteria.
intangible asset without which tangible asset cannot be operated
capitalised as part of tangible asset cost.
how to tell if life of intangible asset is finite or infinite
-past ability (how did it beat competitors)
-risk
-technology dependent
It’s considered indefinite if it therr is no foreseeable limit to itd userul life. difficulty measuring life doesnt mean u can call it indefinite
why can advertising costs not be capitalised
benefit of advertisement is not separately identifiable
can i record employees as intangible asset
no as they cant be controlled
can i recognise customer loyalty as intangible asset
no as they cant be controlled
why is internally generated goodwill not recognised as intangible asset
as cost can not be measured reliably
if an intangible asset is ready for commercial use but use has not started (eg. backup ACs)
amortization will not be done
impairment review annually
