Intangibles

Question 1

What is the accounting standard for Intangible Assets?

Answer 1

IAS 38

Question 2

When would you recognise an intangible asset?

Answer 2

Probable future economic benefits

Measured reliably

Question 3

What is the criteria for capitalising development expenditure?

Answer 3

Probable future economic benefits
Intention to complete
Resources are adequate
Ability to use
Technically feasible
Expenditure is separately identifiable

Question 4

What is the pneumonic for the criteria for capitalising development expenditure?

Answer 4

PIRATE

Question 5

List three items that you cannot specifically capitalise that are ‘intangible’

Answer 5

Advertising
Research
Internally generated brand names
Customer base
Training
Goodwill
Mastheads

Question 6

According to IT, what standards relate to hardw are, software and operating systems?

Answer 6

Hardware and operating systems are PPE

Software is intangible

Question 7

When we capitalise something, what do we do with the intangible?

Answer 7

Amortise on a straight line basis over useful life

Question 8

If you have an indefinite useful life, what do you do?

Answer 8

Review impairment every year under IAS 36

Question 9

Explain what type of intangible assets relate to this standard? Which type includes additional recognition criteria?

Answer 9

This requirement applies whether an intangible asset is acquired externally or generated internally. IAS 38 includes additional recognition criteria for internally generated intangible assets.

Question 10

Define research

Answer 10

Research constitutes original and planned investigations undertaken with the prospect of gaining new scientific or technical knowledge and understanding.

Question 11

When is the probability of future economic benefits assumed?

Answer 11

The probability recognition criterion is always considered to be satisfied for intangible assets which are acquired separately or in a business combination.

Question 12

If expenditure does not meet criteria, what happens?

Answer 12

Expense is recognised when it is incurred

Question 13

How are intangibles measured initially (3 ways)?

Answer 13

If purchased separately - cost
If as part of a business combination - FV @ date of acquisition
If internally generated goodwill - not recognised

Question 14

What are the criteria in the revised 2018 Conceptual Framework?

Answer 14

• the item meets the definition of an asset and liability
• such recognition provides users of financial statements with
  1. Relevant information bout the asset or the liability and about any resulting income, expenses or changes in equity; and
  2. A faithful representation

Question 15

What does an intangible asset have to be?

Answer 15

An identifiable non monetary asset without physical substance

Question 16

When does the requirement apply?

Answer 16

Whether an asset is acquired externally or generated internally

Question 17

What must the probability of future economic cashflows be based on?

Answer 17

Reasonable and supportable assumptions about conditions which will exist over the life of the asset

Question 18

When is the probability criteria always considered to be satisfied?

Answer 18

For intangible assets which are acquired separately or in a business combination (IFRS 3)

Question 19

What did the IASB decide?

Answer 19

That the probability criterion should not exist so does not prohibit the recognition of assets or liabilities which a low probability of an inflow or outflow or economic benefits

Question 20

How are intangibles measured after recognition?

Answer 20

Cost or revaluation

Question 21

When is the revaluation model used?

Answer 21

When the asset is traded in an active market

Question 22

What are the three relevant points in relation to amortisation?

Answer 22

• Residual value is normally assumed to be zero
• Amortisation begins when it is available for use
• methods based on expected revenue are normally inappropriate

Question 23

Define an indefinite useful life

Answer 23

Where there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity. The term indefinite does not mean infinite.