IAS 38 -Intangible Assets Flashcards
How can an Intangible Asset be identified?
An Intangible Asset is identifiable if it is separable (that is can be sold, transferred, exchanged, licensed or rented to another party on its own rather than as part of a business) or it arises from contractual or other legal rights.
What is the definition of an Intangible Asset?
An intangible asset is an identifiable non-monetary asset without physical substance, such as licence, patent or trademark
Can employees be recognised as an asset?
Employees cannot be recognised as an asset; they are not under the control of the employer, are not separable and do not arise from legal rights.
When should an Intangible Asset be recognised?
An intangible asset should be recognised if it is probable that future economic benefits attributable to the asset will flow to the entity and the cost of the asset can be measured reliably.
How should an Intangible Asset be measured AT recognition?
At recognition the intangible asset should be recognised at cost (purchase price plus directly attributable costs)
How should an Intangible Asset be measured AFTER recognition?
After initial recognition an entity can CHOOSE between the cost model and the revaluation model. The revaluation model can only be adopted if an active market exists for that type of asset.
ACTIVE MARKETS ARE RARE, BUT MAY EXIST FOR CERTAIN LICENCES & PRODUCTION QUOTAS
How should an Intangible Asset acquired as part of a business combination be measured?
An Intangible Asset acquired as part of a business combination should initially be recognised at fair value.
What is the correct action for internally generated Goodwill?
Internally generated goodwill should NOT be recognised
How should expenditure incurred in the research phase of an internally generated intangible asset be treated?
Expenditure incurred in the research phase of an internally generated intangible asset should be treated as expense incurred.
How should expenditure incurred in the development phase of an internally generated asset be treated?
Expenditure incurred in the development phase of an internally generated intangible asset SHOULD BE CAPITALISED provided it can demonstrate the following ; -
1) Probable future economic benefits
2) Intention to complete the intangible asset
3) Resources available to complete the development
4) Ability to use or sell the intangible asset
5) Technical feasibility of completing the intangible asset
6) Expenditure attributable to the development can be measured reliably
NOTE : THE ASSET MAY BE CAPITALISED FROM THE DATE ALL THE CRITERIA IS MET
How should expenditure incurred PRIOR to the criteria being met be treated?
Expenditure incurred prior to the criteria being met may NOT be capitalised retrospectively
How should an Intangible Asset with a finite useful life be amortised?
An Intangible Asset with a finite useful life should be amortised over its expected useful life, commencing when the asset is available for use.
How should an Intangible Asset with an INDEFINITE useful life be amortised?
An Intangible Asset with an indefinite useful life should NOT be amortised, but should be reviewed for impairment on an annual basis
What happens to the gain or loss on the disposal of an Intangible Asset?
On the disposal of an intangible asset the gain or loss is recognised in profit or loss
What are common examples of Intangible Assets?
Common examples include : -
- Computer software
- Patents and copyrights
- Motion picture films
- Customers lists, customer loyalty
- Airline landing slots
- Fishing licenses
- Franchises
