IAS 38 - INTANGIBLE ASSETS Flashcards
What are the two categories of Intangible assets?
1- purchased
2- internally generated
what is the recognition criteria of purchased intangible assets?
1- must meet the 3 conditions of intangible asset
-no physical substance
-non monetary
-identifiable/ separable
2- must meet normal conditions-cost can be measured reliably and
3- must provide probable economic benefit
what does IAS 38 say about recognition of internally generated intangible assets?
internally generated intangible assets like goodwill, brand, mastheads, publishing titles, customer lists can NOT be recognised.
-however other intangible asets like games developed can be resogniesed
what are the methods for measurement of an intangible asset that you purchased?
-an intangible asset that has been purchased separately must initially be measured at cost.
-then u can choose between:
a) cost model: cost less accumulated ammortization, impairment losses
b) revaluation model: only allowed if there is an active market. (internally generated softwares dont have active market)
what things are not allowed to be revalued according to IAS 38?
patents, trademarks, brand names, publishing rights
what is an active market?
1- price is available to public
2-homogenous
3- active markets are rare.
what are the methods of ammortization?
when an asset has finite life, we ammortize using straight line method, scrap value zero normally.
if asset has infinite life, we dont ammortize it. we test for impairment annually. more often if there is a hint.
what is the criteria that needs to be met to recognize development costs?
P- Probable chances of economic benefit
I- Intention to complete and use/sell it
R- resources available
A- ability to use or sell
T- technical feasibility
E- expenditure reliably measured
when do we start ammortizing an intangible asset?
as soon as commercial production begins. / project launch (logic: matching principle)
difference between research and development cost?
research is done in planning stage, to expand knowledge. it is written off in I/S.
development is when there is intention to complete, after decision is taken. they are capitalised after meeting PIRATE criteria.
intangible asset without which tangible asset cannot be operated
capitalised as part of tangible asset cost.
how to tell if life of intangible asset is finite or infinite
-past ability (how did it beat competitors)
-risk
-technology dependent
It’s considered indefinite if it therr is no foreseeable limit to itd userul life.m difficulty measuring life doesnt mean u can call it indefinite
