IAS 38

Question 1

What does IAS 38 relate to?

Answer 1

Intangible assets are identifiable non-monetary assets with no physical substance

Question 2

What does identifiable mean?

Answer 2

That it is separable (can be sold separately to other assets) or it arises from a legal / contractual right.

Question 3

What does separable mean?

Answer 3

Sold separately ie if we have a patent

Question 4

What does legal / contractual mean?

Answer 4

Ie we have a contract

Question 5

What does no physical substance mean?

Answer 5

No physical substance -

We can’t touch or feel it.

IE brands, patents, contracts

Question 6

What are the IAS 38 Intangible Asset Recognition Rules?
When can we recognise an Intangible Asset?

Answer 6

1. We must have control - we can direct the use of the asset and derive the economic benefits from it.
2. There must be a probable inflow of economic benefit. (More the 50% chance)
3. We must be able to identify a cost or a value from the asset

Question 7

How to account for IAS 38 Intangible Assets?

Answer 7

1. Recognise initally at cost - those costs that are necessary, direct and efficient
2. Amortised over the useful life
3. Revaluation is permitted
4. You can’t recognise internally generated intangibles
5. Remember research and development costs - research to P and L and development to SOFP

Question 8

How to treat an Intangible Asset with an indefinite life?

Answer 8

If there is evidence that the asset may last indefinitely, don’t amortised but carry out an annual impairment test (IAS 36)

Question 9

How to revalue an Intangible Asset?

Answer 9

Revaluation is permitted - the asset needs to be revalued to fair value.

The fair value is determined with reference to an active market.

If the asset is unique, no active market exists.

Question 10

What are internally generated intangibles?

Answer 10

There are assets the company have made themselves through ongoing operations.

Generally these cannot appear on the SOFP.

Question 11

Internally generated intangibles we cannot put on SOFP examples are….

Answer 11

1. Goodwill
2. Brands
3. Customer lists
4. Publishing titles
5. Mastheads
6. Anything to do with marketing, PR and advertising

Question 12

How do we account for Research and Development costs?

Answer 12

Research costs we put to the P and L.

Development costs to the SOFP

Question 13

Once we start commercial production what do we also start?

Answer 13

Amortisation