Chapter 4 Intangible Assets Flashcards

1
Q

Intangible asset (IAS38)

A

An intangible asset is an identifiable non-monetary asset without physical substance.

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2
Q

Recognition

A
  • Probable future economic benefits are attributable to the asset will flow to the entity.
  • The cost of the asset can be reliably measured.
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3
Q

Measurement at recognition

A
  1. Separate acquisition - Cost
  2. Acquired as part of a business combination - Fair Value (IFRS 3)
  3. Internally generated goodwill - Not recognised
  4. Internally generated intangible assets - Recognised when PIRATE criteria met

Probable future economic benefits
Intention to complete and use/sell asset
Resources adequate and available to complete and use/sell asset
Ability to use/sell asset
Technical feasibility of completing asset for use/sale
Expenditure can be measured reliably

Research phase - all expenditure recognised as an expense
Development phase - all PIRATE must be capitalised

  1. Acquired by government grant - Asset and grant at FV or nominal amount + expenditure directly attributable to preparation for use
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4
Q

Measurement after recognition

A
  1. Cost model

Cost less accumulated amortisation and impairment losses

  1. Revaluation model

Revalued amount less subsequent accumulated amortisation and impairment losses

  • The revaluation must be fair value at the date of the revaluation by reference to an active market.
  • All other assets in the same class must be revalued.
  • Uncommon for an active market to exist for intangible assets.
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5
Q

Amortisation/impairment tests

A
  1. Finite useful life
    The depreciable amount (cost/revalued amount - residual value) is allocated on a systematic basis over useful life.

The residual amount is normally assumed to be zero.

Must be reviewed at least at each financial year-end.

  1. Indefinite useful life
    Not amortised.

Impairment tests are conducted at least annually (IAS 36).

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