IAS 38 : INTANGIBLE ASSET

DEFINITION
1. Identifiable
  1. separable
  2. ↑ from : contractual / legal rights
2. Non-monetary
  1. $ held
  2. A to be received in DETERMINABLE amount
3. Asset
  1. control & past event
    1. Control acieved if entitiy has :
      1. ability-restrict access
        power- obtain f.e.b
        from legal rights ie copyright
        NOT NECESSARY but, more DIFFICULT to PROVE if dont have it
        market & tech. knowledge
  2. expected f.e.b
4. w/o physical substance
  1. Judgement: which is more significant
    1. Physical(tangible)
      1. IAS 16:PPE
    2. Non-physical (intangible)
      1. IAS 38: IA
RECOGNITION
1. Probable f.e.b flow
  1. assumed to be satisfied in both situation
    1. Reliably measured
    2. Cost measured @ FV
      1. FV= Market expectation of expected f.e.b
    3. IA separately identified
      1. sufficient information
2. Reliably measured
MEASUREMENT
1. INITIALly measured @ COST
  1. ACQUIRED
    1. Part of biz comb.
      1. FV @ acquisiton date (FV= market expectation of expected f.e.b)
        MP in ACTIVE MARKET
    2. Separately
2. SUBSEQUENT recognition
  1. 1. 1. Rev. needs ACTIVE MARKET hence, X for:
        -brands
        mastheads
        patents/trademarks
        customers lists
        publishing titles
CAPITALISED
1. purchased goodwill
  1. purchased IA
    1. DEVELOPMENT costs
EXPENSED
1. start up cost
  1. training
    1. advert
      1. if paid, becomes asset : prepaid __
  2. internally generated
    1. goodwill
      1. brand
        customer list
        training
        mastheads and publishing titles
        SUBSEQUENT EXP.
        due to nature of IA, usually cant be distinguished from cost of developing biz as a WHOLE
        ALWAYS EXPENSED
    2. RESEARCH costs
2. UNLESS:
  1. forms part of the cost
    1. meets all recognition criteria
  2. forms part of goodwill on BIZ COMB.
3. once expensed cannot be capitalise later on
INTERNALLY GENERATED IA
1. X meet definition and recognition criteria
  1. INTERNALLY GENERATED GOODWILL
    1. EXPENSED
      1. WHY?
        D
        X identifiable
        X control
        ✓ generate f.e.b
        R
        X measured realiably
        ✓ probable f.e.b
2. ✓ meet definiiton and recognition criteria
  1. INTERNALLY GENERATED IA OTHER THAN GOODWILL
    1. DIFFICULT to asses R criteria
      1. HENCE, additional requirement to classify asset generation into:
        RESEARCH phase
        DEFINITION
        original+planned investigation to gain new scientific knowledge+understanding
        UNCERTAIN f.e.b will flow (because it is merely and investigation)
        EXPENSE | ASSET
        EXAMPLES:
        activities - new knowledge
        search+evaluate - research findings
        search - alt new&improved materials, products, process (MPP)
        formulate+design+evaluate - alt MPP
        Design+Construction+Testing - prototypes
        D tools involving new tech
        D+C+ operate - pilot plant
        D+C+T - new&improved MPP
        Recognised as ASSET if 6 criteria are met:
        G- generate feb
        A - ability to use
        M - measured reliably
        A - availability of resouce to complete
        T - technical feasibility
        I - intention to complete
        IF ONE OR MORE NOT MET - EXPENSED !
        recognised as asset meaning it meets the 2 asset recognition criteria- probable, reliably
        DEVELOPMENT phase
        DEFINITION
        application of research findings -- plan production of new&improved items
        MORE ADVANCED stage of creation
        PROBABLE f.e.b flow
3. eg: exp on brands, trademarks, customer loyalty programme
USEFUL LIFE
1. FINITE
  1. INDEFINITE
    1. X ammortised
      1. Test for impairment
        annually
        there is signs IA may be IMPAIRED
        Useful life - reviewed each period : determine if indefinite life appropriate (IF NOT change acc to IAS 8)
  2. ✓ ammortised
    1. Residual value = 0 , unless :
      1. active market
      2. commitment by 3rd party to PURCHASE
      3. Amm. period+method: REVIEWED ANNUALLY ( acc to IAS 8)
RETIREMENT & DISPOSALS
1. Derecognised when :
  1. disposal
  2. NO expected feb
  3. FORMULA: gain/loss = net proceed on disposal - CA ( cost/rev model)

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IAS 38 : INTANGIBLE ASSET

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