Intangible Assets Flashcards
Intangible assets
identifiable, non-monetary asset without physical substance
identifiability
tests whether a company can divide an asset from other assets and deal with it as an individual asset (separability)
separability
is capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, asset or liability
non-monetary
an asset is monetary if it is money held or an asset to be received in fixed or determinable amounts of money
Criteria recognition on intangible assets
- identifiability (meets definition of intangible asset)
- control (power to obtain economic benefits asset and ability to deny access benefits to all other parties
- future economic benefits probable
- reliable measurement of costs
Difficult to recognize internally generated intangible assets
- problem of establishing whether or not there is an identifiable asset which will generate future economic benefits (highly uncertain)
- problem of determining the cost of the asset reliably
Research expenses recognition
always recognized as an expense
Development expenses recognition criteria
- technical feasibility
- intention to complete the intangible asset and to use or sell it
- ability to use or sell it
- demonstration of how the intangible asset will generate economic benefits
- availability of adequate technical, financial, and other resources to complete the development
- ability to measure reliably the expenditure
explicit recognition exclusions
- internally generated goodwill
- internally generated brands, mastheads, publishing titles, etc.
- certain expenditures relating to start-up activities, training activities, advertising and promotional activities, or relation and reorganization of the entity
measurement at initial recognition
at cost (purchase price, directly attributable costs or preparing the asset for its intended use, costs of generating an intangible asset)
not directly attributable costs intangible assets
indirect costs and general overheads, such as selling or administrative costs, costs of staff training, initial losses
subsequent measurement intangible assets
- cost model - measurement at cost less accumulated amortization and impairment losses
- revaluation model - measurement at fair value determined at regular revaluation dates less any subsequent accumulated amortization and impairment losses (ONLY if active market exists)
residual value assumed to be zero unless
- there is a commitment by a third party to purchase at end useful life
- there is an active market for asset