IAS 38 - Intangible Assets

Question 1

identifiability

Answer 1

The asset is either separate from the entity and is capable of being sold/transferred, or it arises from contractual of other legal rights

Question 2

intangible assets

Answer 2

An identifiable non-monetary asset without physical substance

Additional notes

(remember “3 C-s, plm”) computer software, copyrights, customer lists, patents, licenses, marketing rights

Question 3

research

Answer 3

(remember “OP”, and “ST”) original and planned investigation undertaken with the prospect of gaining new scientific/technical knowledge and understanding

Question 4

6 criteria for development costs to be recognised in the SOFP

Answer 4

• the technical feasibility of completing the intangible asset so that it will be available for use/sale
• its intention to complete the intangible asset and to use/sell it
• its ability to use/sell the intangible asset
• the way in which the intangible asset will generate probable future economic benefits
• the availability of resources to complete the development and to use/sell the intangible asset
• its ability to measure the development expenditure reliably

Question 5

control

Answer 5

The entity has the power to obtain future economic benefits from the asset

Question 6

2 main sources for intangible assets

Answer 6

Purchased or internally generated

Additional notes

Internally generated goodwill/brands are not recognised as assets

Question 7

3 key elements of intangible assets

Answer 7

identifiability, control, future economic benefits

Question 8

development

Answer 8

(remember “mdppss”) application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems, or services before the start of commercial production/use

Question 9

future economic benefits

Answer 9

include revenue from the sale of products/services, cost savings, or other benefits

Question 10

measurement of intangible assets

Answer 10

Initially measured at cost on the SOFP. Classify the useful lives of intangible assets as either finite or indefinite.

Additional notes

• Finite:
• amortised over its useful life
• the method of amortisation should reflect the pattern of benefits expected by the entity (if the pattern cannot be determined reliably, then the straight-line method should be used)
• the amount of amortisation is to be recognised as an expense in the SOPL and other comprehensive income
• the residual value should be assumed to be 0 (unless there is an agreement for a third party to buy it at the end of its useful life, or where a residual value can be determined by reference to a market in such assets)
• the amortisation period and method should be reviewed at least anually
• Indefinite:
• test for impairment annually in accordance with IAS 36, and whenever there is an indication that the asset may be impaired
• useful life to be reviewed each accounting period (to determine whether it’s still indefinite)