IAS 38 Intangible Assets

IAS 38 Intangible Assets

1. Definition - An identifiable asset without physical subtance

2. Recognition- 1) Probable future economic benefit will flow to the entity 2) cost can be measured reliably

3. Derecognition- 1) No probable future economic entity flow the entity 2) Disposal

4. Identifiable- Asset is identifiable if 1) it is separate 2) it arises from contractual or other legal rights

5. Measurement Criteria

   • Initial Measurement
     • Purchase price + Direct Cost
     • IAS 38 prohibits the recognition of internally generated GW and any internally generated intangible. The only exception to this rule is development expenditure that meet recognition criteria (PIRATE).
       • PIRATE
         • Probable Future economic benefits
         • Intention to complete and use/sell
         • Resources adequate to complete and use/sell
         • Ability to use/sell
         • Technical feasibility
         • Expenditure can be measured reliably
   • Subsequent Measurement
     • Cost Model
       • Cost - Amortization - impairment Loss
     • Revaluation Model
       • Revalued amount - Amortization based on revalue amount - Impairment Loss
       • Double Entry - go up- to OCI, go down- 1st to OCI then P&L
       • Permitted for IA if it ha an active market. Otherwise is cost model.
       • In the year of disposal- any balance available in REVALUATION SURPLUS with respect to the asset disposed is realised- transfer from RS to RETAINED EARNING

6. Amortization/Impairment Tests

   • Finite Useful Life
     • Amortise
     • impairment if evidence
   • Indefinite Useful Life
     • NO amortise
     • MUST do impairment test