Intangible Assets

Question 1

Intangible Asset

Answer 1

1) asset is identifiable (separate or contractual/legal right)
2) the entity controls the future economic benefits of the asset
3) the asset will generate future economic benefits

Question 2

If all the criteria of an intangible asset is met, an acquired intangible asset can be recognized when:

Answer 2

1) probable that expected future economic benefit of the asset will flow to the entity
2) costs can be reliably measured
(if acquired in business combination, the probability is assumably always met if FV can be determined, and the cost is the FV at the date of the business acquisition)

Question 3

Goodwilll

Answer 3

not identifiable asset and only recognized in business combination
(internally generated goodwill is not recognized because it is not reliably measured and not an identifiable resource)

Question 4

Intangibles acquired by government grant

Answer 4

record asset and grant @ FV or nominal value + direct expenses to prepare for use

Question 5

Intangibles acquired by exchange of assets

Answer 5

Measure at FV unless:
1) transaction lacks commercial substance , OR,
2) the FV of the asset received for asset given up cannot be measured reliably
therefore if either condition is met, you measure at the CV of asset given up

Question 6

Internally generated intangible

Answer 6

1) research costs = expense
2) Development costs = capitalized at the point when all the development criteria met

Question 7

Development costs criteria

Answer 7

1) technical feasibility to complete
2) intent to complete
3) ability to reuse or resell
4) probable future economic benefit
5) adequate technical/financial/other resources available
6) able to reliably measure expenditures

Question 8

Development costs to be capitalized

Answer 8

• cost of materials/services used to generate the intangible
• cost of salaries/wages/benefits incurred to generate the intangible
• fees to register a legal right
• amortization of patents/licenses used to generate intangible
• interest costs

Question 9

Development costs not eligible to be capitalized

Answer 9

• selling/admin/general overhead expenditures unless expenditure can be directly attributable to preparing asset for use
• initial operating losses incurred before planned performance achieved
• cost of training staff to operate or use the asset

Question 10

Subsequent measurement of intangible asset

Answer 10

• Finite life = amortized over UL (cost model (and tested for impairment annually) using SL, diminishing balance or units of production, OR revaluation model which is only available for intangible assets that are traded on active market)
• Infinite life = not amortized, but annually tested for impairment

Question 11

Derecognition of Intangible assets

Answer 11

when disposed of or no longer provides economic benefits to the company

Question 12

ASPE vs IFRS - Intangible assets

Answer 12

• ASPE policy choice to capitalized or expense development costs for all internal projects
• no revaluation model under ASPE
• impairment only tested when indicating events under ASPE