Intangible Assets

Question 1

What is an intangible asset

Answer 1

An identifiable non monetary asset without having physical substance
Assets that meet the controlled and identifiability criteria can only be recognised if
It is probable that future economic benefits will flow to the entity
Initial cost can be reliably measured

Question 2

When does an organisation have control

Answer 2

When it has power to obtain economic benefit and restrict access

Question 3

Under what IAS is are intangible assets recognised

Answer 3

IAS38

Question 4

How should purchased intangibles be treated?

Answer 4

Cost model is usually favoured
Recorded at cost
Revalued only if there is an active market
Amortised in line with depreciation over its useful life
Where It has an indefinite life no amortisation is required but asset should be subject to annual impairment reviews
Cannot include advertising, admin, initial operating losses

Question 5

How are internally generated intangibles recognised

Answer 5

They should not be recognised and all expenditure is treated as an expense costs cannot be distinguished from developing the business as a whole

Question 6

Amortisation

Answer 6

Finite life- amortised on a systematic basis over that life and tested when there is a triggering event

Indefinite life- should not be amortised
Subject to annual impairment reviews
Useful life should be reviewed at the end of each reporting period

Question 7

Research and development

Answer 7

Research- no intangible asset and expensed as an entity cannot demonstrate that and intangible asset exists that will generate future economic benefits

Development- expenditure is capitalised and subject to amortisation as the entity can identify and intangible asset

Question 8

What are the conditions for capitalisation of development expenditure

Answer 8

The technical feasibility of completing an asset so it will be available for use or sale
Intention to use or sell
Ability to use or sell
How the asset will generate future economic benefit

Question 9

Goodwill

Answer 9

Purchased- recognised at cost and assumed to have an indefinite life but subject to annual impairment review

Internally generated- cannot be recognised

Question 10

What are the disclosure requirements

Answer 10

Carrying amount
Useful life 
Amortisation
Basis for determining life
R and d expenditure
Contracts to acquire assets