IAS 38 ITA

Question 1

Definition of Intangible Assets

Answer 1

An identifiable non-monetary asset without physical substance

Question 2

Recognition of ITA

Answer 2

1. Identifiable - It could be disposed of without disposing of the business at the same time
2. Controlled by the entity - has power to obtain economic benefits from it
3. Generate probable future economic benefits for the entity
4. Cost can be measured reliably

Question 3

Costs incurred in the development phase should be recognised as an intangible asset if they meet following criteria

Answer 3

1. The project is technically feasible
2. The asset will be completed then used or sold
3. The entity is able to use or sell the asset
4. Will generate future economic benefits
5. Entity has adequate technical, financial and other resources to complete the project
6. The expenditure on the project can be measured reliably

Question 4

Rebuttable presumption of IAS 38

Answer 4

The use of amortisation based on revenue generated by an activity which includes the use of an intangible asset is not appropriate.

Question 5

Overcome presumption

Answer 5

By showing that revenue and the consumption of the economic benefits of the intangible assets are highly correlated.

Question 6

ITA can be classified as having finite or indefinite useful life. How to expense them?

Answer 6

1. Finite - shall be amortised over the expected useful life of the ITA
2. Indefinite - shall not be amortised but instead be tested for impairment annually.