Unit 4 Flashcards
Intangible Assets
Chapter 30
IAS 38
ASPE3064
What are the definition criteria for an intangible asset
It should meet at least one of these criteria :
1. Identifiable - s/b separable and arising from legal rights
2 Generate FEB - Provides future economic value to the entity
3. Control FEB -Entity controls the future economic benefits
What are the recognition criteria for initial measurment
- It should be probable that future economic benefits will flow to the entity
- The cost can be reliably measured
- Those acquired in a biz combination, it is assumed that the probability is met as long as the FV (cost) is known
What are the measurement criteria for an internally generated intangible assets
Reasearch cost - Expense
Development cost- capitalize when all met -
- Complete feasibility study
- Theres intention to complete
- Ability to use or sell
- Probable FEB
- Theres adequate technical, financial and human resources to complete
- Ability to measure expenses
What are the criteria for capitalizing intangible assets?
- Both the definition and recognition criteria must be met
- Establish it is in the development phase (6 criteria)
- Determine if the expenditure qualify to be capitalized
What are the criteria to support that an IA can bring future economic benefits and can be reliably measured
- Is the asset technically able to be completed
- Does the entity plan complete it
- When completed, does the entity have a use for it
- When in use, will it generate economic benefits
- Does the entity have the means to complete the development
- Does the entity know the cost directly attributable to the development be reliably measured
How are IAs subsequently measured
Those with finite life
1. Cost Method
- Determine useful life
- Amortize using SL or units of production
- Test for imparment annually
-2. Revaluation Method
- Only for IAs traded in an active market
Those with Infinite life (eg Goodwill)
- Not amortized but tested annually for impairment
How is Goodwill treated in IGIA
It is not considered an identifiable asset and so is only recognized when acquired in a business combination
What are the other major notes for ASPE3064 / IAS38
Both - For purchased intangibles, it is assumed that future benefits exist
Both - internally generated brands, mastheads, publishing titles, customer lists, and items similar in substance CANNOT be capitalized
ASPE - Allows policy choice in development costs for internal projects. Could capitalize or expense
What should be included in the presentation and disclosure notes
- Whether useful lives are finite or infinite
- Amortization method used for finite lives
- Gross carrying amt, accumulated amortization at the beginning and end of the period
- Reconciliation of change in carrying amounts during the year
- Assets with indefinite useful lives, state the carrying amount and the reason for the assessment
- Aggregate amount for R&D for the period
- Clearly distinguish between IG assets and other intangible assets
Foreign Currency Transactions
Chapt 63
IAS 21
ASPE 1651
What are the steps to record FCTs
- Determine the functional currency
- Initial measurement
- Translate using the spot rate at the date of the transaction
- Txns occurring evenly overtime, use average rate - Subsequent measurement
a. Monetary- Closing rate on the SFP date
- Gain or loss to P or L
b. Non-monetary- If measured at historical cost - no update
- If measured at fair value - exchange rate at revaluation date (IFRS)
- exchange rate at balance sheet date (ASPE)
NM items measured at fair value
- When revaluation gain or loss is reported in SCI, the exchange gain or loss is also reported in the P or L.
- When it is reported in OCI, the exchange too is reported in OCI
Derecognition
NT items are first revalued using spot rate, then derecognized the normal way
Presentation & disclosure requirements
- Functional currency used
- Amount of gain / loss in SCI
- If theres a change in functional currency , state old and new and rationale
Valuations
Finance
Chapt 29
Valuations - Asset Based Approaches
Finance
Chapt 30