IAS38- Intangible Assets

IAS38- Intangible Assets

1. Definition

   • IAS38 defines an Intangible Asset as an identifiable, non-monetary asset without physical substance

2. When should an item of Intangible Asset be recognised

   • Recognised as an Intangible Asset when its cost can be measured reliably and it is probably that future economic benefits associated with the item will flow to the entity

3. Measurement of Intangible Assets

   • An item of Intangible Assets should be measured at cost
     • The two components of cost are:
       • 1. Purchase price which includes import duties and non-refundable purchase taxes, less trade discounts or rebates.
       • 2. Directly attributable costs to bring the asset to the location and condition necessary for it to be capable of operating.

4. After initial recognition, intangible assets may be measured using either:

   • The Cost Model
     • After initial recognition, Intangible assets are carried at cost less any accumulated amortisation and less any accumulated impairment losses.
   • The Revaluation Model
     • After initial recognition, intangible assets are carried at a revalued amount. The revalued amount of of an Intangible asset consists of its fair value at the date of revaluation, less any subsequent accumulated amortisation and less any subsequent accumulated impairment losses.

5. Treatment of research and development costs

   • All research expenditure must be written off as an expense when it is incurred.

6. Development Phase

   • An intangible asset which arises from the development phase of an internal project must be recognised if certain criteria are satisfied for example:
     • technical feasibility of completion
     • availability of resources to complete
     • intention to complete and ability to use/sell the asset
     • probability of future economic benefits
     • ability to measure expenditure reliably