Intangible Assets Flashcards
Intangible Assets definition according to IAS38 Intangible Assets:
An identifiable non-monetary asset without physical substance.
Monetary Asset Definition (IAS38) Definition:
Money held and assets to be received or fixed or determinable amounts of money.
An asset is identifiable if either:
1.) It is separable-capable of being seperated/divided from entity and sold/transferred/licensed/rented/exchanged INDIVIDUALLY or with a related contract or identifiable asset or liability regardless of whether entity intends to do so.
2.) It arises from contractual or other legal rights (regardless of whether those rights are transferable or separable from entity or other rights/obligations.)
What is the recognition criteria for Intangible assets ?
- It is probable that the entity will receive future economic benefits from the asset
- Cost of the asset can be measured reliably
What are the 3 categories of intangible assets (IAS38)?
- Acquired separately
- Acquired as part of a business combination
- Internally generated
Recognition of categories:
1.) Acquired separately = Recognize as an intangible asset
2.) Acquired as part of a business combination = Recognise as intangible assets separately from goodwill in group accounts. If only separated together with a related contract, identifiable asset or liability, group together with related item.
IFRS 3 Business Combinations definition:
A transaction or other event in which an acquirer obtains control of one or more business.
What is Goodwill?
Reflects an entity’s value over and above its recorded value in the financial statements. Referred to as the reputation of the business.
Two types of goodwill:
1.) Internally generated goodwill = Do not recognise as an intangible asset if it is not identifiable (not separable nor arising from contractual/legal rights) and cannot be measured reliably
2.) Goodwill arising as result of business combination = Recognise positive goodwill as intangible asset in the group accounts
Expenditure of an Internally Generated Intangible Asset is classified into which two expenditures?
- a research phase
- a development phase
Definition of Research:
Original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge or understanding.
Definition of Development:
Application of research findings to a plan or design for production of new or substantially improved materials, products, processes, systems or services before the start of commercial production or use.
What internally generated items are not allowed to be recognised as Intangible Assets according to IAS38?
- Brands
- Mastheads
- Publishing titles
- Customer lists
Recognition of Intangible Assets (3 ways)
1.) Intangible asset acquired separately = Measure at cost= Purchase price and any directly attributable costs
2.) Acquired as part of business combination = Measure at fair value as defined by IFRS13.
3.) Internally generated intangible asset = Measure at cost = sum of expenditure incurred from date asset first meets recognition criteria. Directly attributable costs.
Definition of an Active Market (IFRS13):
A market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on on ongoing basis.
