Intangible assets Flashcards
What is an intangible asset?
An identifiable non-monetary asset without physical substance.
What are the criteria for an intangible asset to be recognised?
It should be -
- identifiable
separable (can be disposed on its own)
arises from contractual or other legal rights
- under the control of the entity
When can it be recognised as an asset?
it is probable that any future economic benefit associated with the item will flow to the entity.
the item has a cost or value that can be measured reliably
How do you initially measure intangible assets?
Measured at cost which includes:
purchase price
directly attributable costs of preparing the asset for its intended use
eg. employee costs, legal fees, costs of testing
Should you recognise internally generated assets?
No- do not recognise anything relating to goodwill, brands, mastheads, titles etc as it is not possible to find a reliable measurement
What is the accounting treatment for research and development?
Research is always expensed as it is incurred.
Intangibles generated through development phase must be capitalised provided the following can be demonstrated:
Probable the asset will generate future economic benefit
Intention to complete the asset and use or sell
Resources are available to sell the asset or use
Ability to use or sell asset
Technical feasibility of completing the asset
Expenditure can be measured reliably.
ONLY CAPITALISE WHEN CRITERIA MET
How should you account for assets acquired as part of a business combination?
normally considered to meet the criteria so the cost of such assets should be measured at fair value on the date they were acquired.
How do you account for intangible assets measured at cost?
Cost less accumulated amortised and impairments
How do you account for intangible assets using the revaluation model?
Can only be revalued when an active market exists
debit intangible asset (increase in cost)
debit acc amortisation (remove)
credit reval surplus (gain)
How do you account for an intangible asset that has been previously revalued upwards and subsequently revalued downwards?
Impairment first set against the reval surplus and any excess recognised in the P/l
