In progress - PAS 38 Intangible Assets

Question 1

What is the objective of PAS 38?

Answer 1

To specify the accounting treatment for intangible assets not dealt with in another standard

Question 2

What are outside the scope of PAS 38?

Answer 2

• Financial assets (PFRS 9)

Question 3

What are intangible assets?

Answer 3

identifiable non-monetary assets that lack physical substance

Question 4

What are the essential characteristics of an intangible asset?

Answer 4

• Identifiability
• Control
• Probability of future economic benefits

Question 5

What does identifiability mean?

Answer 5

• Separable (can be sold or leased out separately)
  OR
• Arises from contractual or legal right (e.g. franchise, license, patent, trademark, copyright)

Question 6

Control means that

Answer 6

• future economic benefits
• restrict others from using the asset

Question 7

How can an entity obtain future economic benefits?

Answer 7

• revenue
• cost savings
• other benefits

Question 8

What are the criteria used in recognizing an intangible asset?

Answer 8

• Probable future economic benefits
• Cost reliably measurable

Question 9

Intangible asset is initially measured at ___________.

Answer 9

Cost

Question 10

How to allocate the cost of an intangible asset acquired through basket (lump sum) purchase?

Answer 10

Allocated based on the relative fair values

Question 11

What is the cost of an intangible asset acquired in a business combination?

Answer 11

fair value

Question 12

What is the cost of an internally generated intangible asset?

Answer 12

directly attributable expenditures incurred in developing the asset

Question 13

What is the accounting treatment of research expenditures?

Answer 13

Expensed outright

Question 14

What are examples of research activities?

Question 15

What is the accounting treatment of development expenditures?

Answer 15

• expensed outright
  OR
• capitalized as cost of the asset if certain criteria are met

Question 16

What are the criteria that enable the development expenditures to be capitalizable?

Answer 16

• Probability of future economic benefits
• Intention to complete the asset and use or sell it
• Resources are adequate and available
• Ability to sell or use the asset
• Technical feasibility
• Expenditures reliably measurable

Question 17

How are intangible assets subsequently measured?

Answer 17

• Cost Model
  OR
• Revaluation Model

Question 18

How to compute for the carrying amount of an intangible asset measured using the cost model?

Answer 18

CA = cost - accumulated amortization - accumulated impairment loss, if any

Question 19

How to compute for the carrying amount of an intangible asset measured using the revaluation model?

Answer 19

CA = fair value - accumulated amortization - accumulated impairment loss, if any

Question 20

What are the two classifications of intangible assets based on useful life?

Answer 20

1. Finite (e.g. patent, software)
2. Indefinite (e.g. trademark, copyright)

Question 21

How to subsequently measure finite intangible assets?

Answer 21

• should be amortized
• tested for impairment if there is an indicator

Question 22

How to subsequently measure indefinite intangible assets?

Answer 22

• not amortized
• should be tested for impairment annually

Question 23

How to present intangible assets in the Statement of Financial Position?

Answer 23

as a separate line item (presented at its carrying amount)

Question 24

What related accounts are presented in the Statement of Comprehensive Income?

Answer 24

• Amortization expense
• Impairment loss
• Other accounts that may be affected
  
  • research expense
  • loss on lawsuit

Question 25

How should finite intangible assets be amortized?

Question 26

When should an entity derecognize intangible assets?

Answer 26

• on disposal
• no probable future economic benefits