Intangibles Flashcards
What is the accounting standard for Intangible Assets?
IAS 38
When would you recognise an intangible asset?
Probable future economic benefits
Measured reliably
What is the criteria for capitalising development expenditure?
Probable future economic benefits Intention to complete Resources are adequate Ability to use Technically feasible Expenditure is separately identifiable
What is the pneumonic for the criteria for capitalising development expenditure?
PIRATE
List three items that you cannot specifically capitalise that are ‘intangible’
Advertising Research Internally generated brand names Customer base Training Goodwill Mastheads
According to IT, what standards relate to hardw are, software and operating systems?
Hardware and operating systems are PPE
Software is intangible
When we capitalise something, what do we do with the intangible?
Amortise on a straight line basis over useful life
If you have an indefinite useful life, what do you do?
Review impairment every year under IAS 36
Explain what type of intangible assets relate to this standard? Which type includes additional recognition criteria?
This requirement applies whether an intangible asset is acquired externally or generated internally. IAS 38 includes additional recognition criteria for internally generated intangible assets.
Define research
Research constitutes original and planned investigations undertaken with the prospect of gaining new scientific or technical knowledge and understanding.
When is the probability of future economic benefits assumed?
The probability recognition criterion is always considered to be satisfied for intangible assets which are acquired separately or in a business combination.
If expenditure does not meet criteria, what happens?
Expense is recognised when it is incurred
How are intangibles measured initially (3 ways)?
If purchased separately - cost
If as part of a business combination - FV @ date of acquisition
If internally generated goodwill - not recognised
What are the criteria in the revised 2018 Conceptual Framework?
- the item meets the definition of an asset and liability
- such recognition provides users of financial statements with
1. Relevant information bout the asset or the liability and about any resulting income, expenses or changes in equity; and
2. A faithful representation
What does an intangible asset have to be?
An identifiable non monetary asset without physical substance
When does the requirement apply?
Whether an asset is acquired externally or generated internally
What must the probability of future economic cashflows be based on?
Reasonable and supportable assumptions about conditions which will exist over the life of the asset
When is the probability criteria always considered to be satisfied?
For intangible assets which are acquired separately or in a business combination (IFRS 3)
What did the IASB decide?
That the probability criterion should not exist so does not prohibit the recognition of assets or liabilities which a low probability of an inflow or outflow or economic benefits
How are intangibles measured after recognition?
Cost or revaluation
When is the revaluation model used?
When the asset is traded in an active market
What are the three relevant points in relation to amortisation?
- Residual value is normally assumed to be zero
- Amortisation begins when it is available for use
- methods based on expected revenue are normally inappropriate
Define an indefinite useful life
Where there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity. The term indefinite does not mean infinite.
