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Intangible assets
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- 1intangible assetan identifiable non-monetary asset without physical substance'
- 2Intangible Assets key featuresit is a resource controlled by the entity from which the entity expects to derive future economic benefits,
it lacks physical substance, and
it is identifiable and separately distinguishable from goodwill. - 3Examples of intangible assets include the following:licences
patents
brands
trademarks
copyrights
franchises. - 4research Defintion'original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding'
- 5Developmentthe application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before the start of commercial production or use'
- 6Research statement of profit and lossAll research expenditure should be written off to the statement of profit or loss as it is incurred
#Research expenditure does not directly lead to future benefits and therefore it is not possible to follow the matching concep - 7What about capital expenditure on research?Any capital expenditure on research equipment (property, plant and equipment) should be capitalised and depreciated as normal in accordance with IAS 16
- 8Developing costsdevelopment costs must be capitalised as an intangible asset if they meet the definition of an intangible asset and also meet the recognition criteria.
- 9Certain things need to happen in order for this to workit is technical feasibility to complete the intangible asset, so that it is available for sale or for use
there is intention to complete and use or sell the intangible asset
there is ability to use or sell the intangible asset
existence of a market to sell either the asset itself or its output, or the usefulness of the asset can be demonstrated if it is to be used by the business
there are adequate technical, financial and other resources to complete the project so that the intangible asset can be subsequently used or sold
there is ability to reliably measure the expenditure incurred during the development of the intangible asset. - 10If its not metIf the above criteria are not met, development expenditure must be written off to the statement of profit or loss as it is incurred.
- 11If research expenditure has been treated as an expense,it cannot subsequently be reinstated as an asset.
- 12Subsequent treatment of capitalised development expenditureThe asset should be amortised (Write off) over the period that is expected to benefit. This ensures that costs are matched to the revenue in the statement of profit or loss.
- 13When should amoertisation occur?Amortisation should commence with commercial production and charged over the period over which the business expects to generate economic benefits.
Each project should - 14Why should each project be reviewed at the year end?Each project should be reviewed at the year end to ensure that the 'SECTOR' criteria are still met. If they are no longer met, the previously capitalised expenditure must be written off to the statement of profit or loss immediately.
- 15Amortisation of an intangible assetIf the useful life of an intangible asset is finite, the capitalised development costs must be amortised once commercial exploitation begins.
- 16The amortisation method, how should it be usedd used should reflect the pattern in which the asset's economic benefits are consumed by the enterprise. If that pattern cannot be determined reliably, the straight-line method should be used.
- 17Should an intangible asset be amortisedAn intangible asset with an indefinite useful life should not be amortised. An asset has an indefinite useful life if there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the business. Instead, it should be subject to an annual impairment review.
- 18Initial recognition and measurement Intangible Assetan intangible asset shall be measured initially at cost
- 19Subsequent measurementIf the cost model is applied, an intangible asset 'shall be carried at its cost, less any accumulated amortisation and any accumulated impairment losses
- 20For the valuation model to be applied'fair value should be measured by reference to an active market'
intangible assets to be homogeneous (i.e. identical) in nature - 21Is this common?no. This is very rarely the case and therefore, to all intents and purposes, intangible assets are accounted for using the cost model.
- 22Would capital development costs meet the criteria for the valuation modelIn practical terms, capitalised development costs would not meet the criteria for the valuation model to apply and the cost model should always be applied
- 23Intangible Assets, the financial statements should disclose the following for capitalised development costs and other intangible assets:the amortisation method used and the expected period of amortisation
a reconciliation of the carrying amounts at the beginning and end of the period, showing new expenditure incurred, amortisation and amounts written off because a project no longer qualifies for capitalisation
amortisation during the period.
In addition, the financial statements should also disclose the total amount of research and development expenditure recognised as an expense during the period - 24—
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- Descripción
- Fichas sobre Intangible assets, creado por D A el 03/11/2017.
- Creado por
- D A · nov 2017
- Actualizado
- 3 nov 2017
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