Intangible Assets Flashcards
IAS?
38
Definition
An identifiable non monetary asset without physical substance
Should be :
- Identifiable and,
- Under control of the entity
Identifiable if either :
Separable(can be disposed on its own)or,
Arises from contractual or other legal rights
Asset definitions
IASB - present economic resource controlled by the entity as a result of past events.
An economic resource is a right that has the potential to produce economic benefits
IAS 16:
Probable that any future economic benefit associated with the item will flow to or from the entity, and
The item has a cost of value that can be measured with reliability
Examples
Brand names
Publishing titles
Computer software
Patents
Copyrights
Fishing licenses
Franchises
Customer or supplier relationships
Intangible asset separately acquired
Initially measured at cost
Costs include :
Purchase price
Directly attributable costs of preparing the asset for its intended use
Directly attributable costs include:
employee costs, legal and professional fees, costs of testing
The following expenditure is excluded from the cost of the intangible asset :
- costs of introducing new product (inc advertising and promotion)
- costs of conducting business in a new location
- admin and overhead costs
- staff training
Internally generated assets
Do not recognise internally generated - GOODWILL, BRANDS,MASTHEADS, PUBLISHING TITLES, CUSTOMER LISTS
As it’s not possible to find a reliable measurement costs as they cannot be identified separately from developing the business as a whole
R&D
Research phase - Always expense as incurred - NEVER CAPITALISE
An intangible generated during the development phase must be capitalised, provided the following can be demonstrated :
- technical feasibility of completing the Int asset so it can be available for use or sale
- it’s intention to complete the INT asset and use or sell it
- ability to use or sell
- How it will generate probable future economic benefits
- availability of adequate technical, financial, and other resources to complete the development and to use / sell it
- ability to measure reliably the expenditure attributable to the intangible asset during its development
Technical feasibility Intention Ability How it will generate future benefits Resources available Ability to measure expenditure
Capitalise only directly attributable expenditure incurred from the date the criteria are met
Once item is available for use begin to amortise the capitalised expenditure
Intangible assets acquired as part of the business combination
Normally considered to meet IAS 38
Cost of such assets should be measured at FV at the date they were acquired
Intangible assets - measurement after recognition
Revaluation
Cost - measure at cost, less accumulated amortisation and impairments
Revaluation - revalue to FV but only when an active market exists
Active market :
- all items homogenous
- willing buyers/sellers
- prices available to public
Entry:
Dr intangible asset (increase from cost valuation)
Dr accumulated amortisation (clear balance to zero)
Cr revaluation surplus
Amortisation and impairment
Depreciation for an intangible asset
Will only occur if the asset has a finite life and behinds when it deemed ready for its intended use
DR amortisation (SPL) Cr accumulated amortisation
Impairment:
An intangible asset is impaired if there is evidence of its impairment
An intangible asset with an indefinite life is not amortised but is subject to an annual impairment review
Disclosure
Similar to PPE
Each class of assets - disclosure should distinguish internally generated and purchased intangibles
The amount of research and development expenditure that has been charged as an expense in the period should be disclosed
