Government Grants, Intangibles

Question 1

What are Government Grants under IAS 20?

Answer 1

Assistance by the government in the form of transfers of resources to an entity in return for past/ future compliance with certain conditions.

Question 2

When are Government Grants recognised?

Answer 2

When there is reasonable assurance that:
- An entity will comply with grant conditions
- Grant will be received

Question 3

How should Government Grants related to assets be presented in the SOFP?

Answer 3

• Deferred income
  Or
• A deduction from carrying amount of asset

Question 4

What are Intangible Assets under IAS 38?

Answer 4

An identifiable non-monetary asset, without physical substance.
Examples include:
- Trademarks
- Databases, software
- Licensing
- Copyright

Question 5

How is internal generation of an Intangible Asset split?

Answer 5

• Research Phase: Recognised as expenses when incurred
• Development Phase: Recognised as an intangible asset if specific criteria are met

Question 6

When can expenditure on development of an intangible asset be capitalised?

Answer 6

• Probable future economic benefit will be generated
• Intention to complete the asset and use or sell it has to exist
• Resources to complete should be available
• Ability to complete/ sell must exist
• Technical feasability of the asset
• Expenditures should be reliably measured
  PIRATE

Question 7

What development costs cannot be capitalised?

Answer 7

• Start up, pre opening and pre operating costs
• Training costs
• Advertising and promotion costs

Question 8

How would we recognise a Purchased Intangible Asset acquired separately? (e.g. Purchased licence)

Answer 8

Recognised as an intangible assets if future economic benefit criterion met

Question 9

How would we recognise a Purchased Intangible asset acquired as part of business combination?

Answer 9

Capitalise separately from goodwill
- Separately purchased and capable of reliable measurement
- future economic benefit criterion assumed to be met

Question 10

How do we account for the useful life of intangible assets?

Answer 10

Useful life can be finite or indefinite
- Assets with finite life are amortised
- Assets with indefinite life are not amortised, only impairment tests are undertaken