IAS 38 - Intangible Assets

Question 1

What is an asset:

Answer 1

• It’s a resource controlled by an entity as a result of past events
• From which future economic benefits are expected to flow to the entity.

An asset is Identifiable if it is separable and can be transferred separately from the entity (sold, rented)

Control over the assets exists when the entityhas the power to obtain future economic benefits flowing from the asset. (Revenue or cost savings)

Question 2

Examples of intangible assets:

Answer 2

• Patents, trademarks, copyrights
• Customer lists
• Marketing rights
• Brand recognition
• Licences
• Training systems

Question 3

For an Intanglible asset to be recognised: (3)

Answer 3

• it must be controlled and separable from the entity
• the entity gets economic benefit flowing in from it
• the cost can be measured reliably

Question 4

Initial recognition of an Intangible Asset:

Answer 4

• Measure at cost

Answer 5

• Measure at coat

Question 6

Ways to acquire an intangible asset:

Answer 6

• Separate acquisition (recognised at the purchase price)
• Acquired as partner a business combination (Rec at Fair Value in line with IFRS)
• Internally generated goodwill (Not recognised, because it’s not separable from the business.)
• Internally generate intanglibe assets (Further criteria must be met before recognition)

Question 7

Intern

Question 9

Subsequent measurement of an intangible asset - 2 accountancy policies:

Answer 9

• Cost model: asset carried at cost less accumulated amortisation and impairment losses
• Revaluation model: asset carried at revalued amount less subsequent accumulated amortisation and impairment losses

There is often no active market for Intangible Assets, so Revaluations are not easy to obtain.

Question 10

Amortisation of an intangible asset:

Answer 10

• The useful life of IAs are either finite or indefinite.

If finite, then depreciation on a Straightline basis should be applied over its useful life. This is the cost or revalued amount -/- residual value.

If indefinite, it needs to be re-assessed each reporting period, or at least annually, if the useful life is still indefinite
If no longer indefinite, a change in accounting policy needs to be applied.
At least annually the IA needs to be assessed for impairment. If the Carrying Amount is greater than using or selling the asset, then the asset is impaired. Impairment loss gets expensed to p/l.