IAS 38- Intangible Assets

IAS 38- Intangible Assets

1. Definition

   • Identifiable, non-monetary asset without physical substance
   • 1. asset is identifiable (i.e. separable from entity or arises from contractual rights) 2. Asset is controlled by an entity as a result of a past event. 3. Future economic benefits are expected from the asset.
   • Brand names, computer software, licences & franchises, copyrights, patents, customer/client lists

2. Recognition

   • When it satisfies all attributes, can be measured reliably and it's probable that there is expected future economic benefits
   • Once charged to expense, cannot reinstate as intangible asset
   • 1. Intangible Assets Acquired Separately
     • Include import duties, deduct discounts, any costs in preparing the asset for use (wages, prof fees)
     • DONT INCLUDE: advertising, admin, general O/H, initial operating loss
   • 2. Acquired as part of a business combination
     • Separate out intangible asset and other acquisition costs at acquisition date, balancing figure will be goodwill
   • 3. R & D Costs
     • Research costs= expense
     • Development costs= capitalise if: 1. intention to complete the IA, 2. technical feasibility, 3. ability to use and sell IA, 4. generate future economic benefit
       • Phase 1- research- expense costs
       • Phase 2- when development finishes, capitalise dev costs
   • 4. Internally generated brands, customer lists
     • EXPENSE
   • 5. Computer Software
     • If purchased computer software is not an integral part of hardware, IA
     • If purchased software is an integral part of hardware, tangible asset (IAS 16)
   • 6. Website Costs
     • IA if meets recognition criteria and dev costs criteria i.e. if directly used in the income generating (e.g. orders online)
   • 7. Other
     • EXPENSE: start up costs, training costs, advertising, relocation costs, internally generated goodwill

3. Measurement

   • Initial
     • measured initially at cost
   • Subsequent to acquisition (choice)
     • Cost Model (less any amortisation and impairment losses) MOST COMMON
     • Revaluation Model (FV) (only if it can be determined by active market)
   • Subsequent Expenditure
   • Useful Life & Amortisation
     • Finite Life
       • Cost less residual value amortise over useful life. Review amortisation annually
     • Indefinite Life
       • NOT amortised. Review annually
         • Change in useful life from indefinite to finite is a change in accounting estimate