Intangible Assets (IAS 38)

Question 1

How should intangible assets be measured?

Answer 1

Intangible assets should be measured at their cost, unless their fair value can be reliably determined

Question 2

What is an intangible asset?

Answer 2

An intangible asset is an identifiable non-monetary asset without physical substance

Question 3

What are some of the different types of intangible assets?

Answer 3

Goodwill
Patents
Copyrights
Trademarks
Trade secrets
Customer lists
Franchises
Software

Question 4

When should intangible assets be recognized?

Answer 4

They are identifiable.
They have a cost that can be reliably measured.
They are expected to provide future economic benefits.

Question 5

How should intangible assets be amortised?

Answer 5

Intangible assets with a finite useful life should be amortised over their useful life.

Intangible assets with an indefinite useful life should not be amortised, but should be tested for impairment at least annually.

Question 6

When should intangible assets be impaired?

Answer 6

Answer: An intangible asset should be impaired if its carrying amount is greater than its recoverable amount.

The recoverable amount is the higher of the asset’s net selling price and its value in use.

Question 7

What are the disclosure requirements for intangible assets?

Answer 7

The nature of the intangible assets

The carrying amount of the intangible assets

The amortization period of the intangible assets

The impairment losses recognized for intangible assets

Question 8

Can employees be recognised as an asset?

Answer 8

Employees cannot be recognised as an asset; they are not under the control of the employer, are not separable and do not arise from legal rights.

Question 9

How should an Intangible Asset be measured AT recognition?

Answer 9

At recognition the intangible asset should be recognised at cost (purchase price plus directly attributable costs)

Question 10

How should an Intangible Asset be measured AFTER recognition?

Answer 10

After initial recognition an entity can CHOOSE between the cost model and the revaluation model. The revaluation model can only be adopted if an active market exists for that type of asset.

Question 11

How should an Intangible Asset acquired as part of a business combination be measured?

Answer 11

An Intangible Asset acquired as part of a business combination should initially be recognised at fair value.

Question 11

How should an Intangible Asset acquired as part of a business combination be measured?

Answer 11

An Intangible Asset acquired as part of a business combination should initially be recognised at fair value.

Question 12

What is the correct action for internally generated Goodwill?

Answer 12

Internally generated goodwill should NOT be recognised

Question 13

How should expenditure incurred in the research phase of an internally generated intangible asset be treated?

Answer 13

Expenditure incurred in the research phase of an internally generated intangible asset should be treated as expense incurred.

Question 14

How should expenditure incurred in the development phase of an internally generated asset be treated?

Answer 14

Expenditure incurred in the development phase of an internally generated intangible asset SHOULD BE CAPITALISED provided it can demonstrate the following ; -

1) Probable future economic benefits
2) Intention to complete the intangible asset
3) Resources available to complete the development
4) Ability to use or sell the intangible asset
5) Technical feasibility of completing the intangible asset
6) Expenditure attributable to the development can be measured reliably

NOTE : THE ASSET MAY BE CAPITALISED FROM THE DATE ALL THE CRITERIA IS MET

Question 15

How should expenditure incurred PRIOR to the criteria being met be treated?

Answer 15

Expenditure incurred prior to the criteria being met may NOT be capitalised retrospectively