Intangible Non-Current Assets Flashcards
Intangible Assets
- identifiable non-monetary asset without physical substance
- it can’t be touched
Examples of Intangible Assets (6)
- computer software
- licenses - to carry out activities/operate in location
- customer lists - if bought from another business
- franchise
- development expenditure
- goodwill
Research Definition
- original/planned investigation
- undertaken with prospect of gaining new scientific/technical knowledge/understanding
Development Definition
- application of research findings/other knowledge
- to plan/design for production of new/improved materials
devices
products
processes
systems
services - prior to commencement of commercial production/use
Amortisation
- systematic allocation of depreciable amount of an intangible asset over its useful life
Depreciable amount
- cost of asset/other amount substituted for cost
- less residual value
Useful Life
- period over which asset is expected to be available for use by entity
- number of production units expected to bye obtained from asset
Research examples from IAS 38
- activities aimed at obtaining new knowledge
- search for applications of research findings
- search for product/process alternative
- formulation/design of possible new/improved product/process
Development examples from IAS 38
- design, constructions, testing of prototypes/models
- design of tools, jigs, moulds, dies with new technology
- design/operation of pilot plant
- testing of chosen alternative for new/improved materials
What costs can be included with Research and Development?
- any directly attributable
- salaries of personnel engaged in R&D
- cost of materials
- depreciation of assets used
- overhead costs can be allocated
- amortisation of patents/licenses
How should research costs be recognised in statements?
- expense in period they are incurred
- in Statement of Profit/Loss
- at this point toon much uncertainty of economic future value
What criteria mean that development expenditure must be recognised as intangible asset?
- PIRATE
Probable future economic benefits (existence of external market/use within entity) - Intention to complete/use or sell
- Resources (technical/financial) to complete development and use/sell
- Ability to use/sell
- technical feasibility of completing
- expenditure attributable can be measured reliably
What should the development costs not exceed?
- carrying amount of intangible NCA not excess amount that it is probable will be recovered from related future economic benefits
- after decussating further development/production/selling costs
What is the double entry for Amortisation?
Dr Amortisation Expense (SoP/L) increase expense
Cr Accumulated amortisation (SoFP) decrease asset
What should be included in reconciliation of intangible assets in statements?
- carrying amounts at begin/end of period
- movement including
additions
disposals
reductions in CA
amortisation
Format of reconciliation of intangible NCA
- columns for all classes of intangible NCA and total
- rows
Cost - begin
- additions
- disposals
- end
Amortisation
-begin - charge for year
- eliminated on disposals
- end
Carrying amounts end/begin- can be seen reflected from the above totals
What other narrative disclosure should be included in financial statements to do with intangible NCA?
- accounting policies used
For each class - method of amortisation
- useful life/amortisation rate used
- gross carrying amount/accumulated amortisation at begin/end
What is the double entry for research expenditure?
Dr research expenditure
Cr bank
What is the double entry for Development expenditure
Dr intangible non-current asset
CR Bank/Payables
