Intangible Assets Flashcards
What is IAS38?
Intangible assets
Whats the definition of an intangible asset?
An identifiable non-monetary asset without physical substance
Do intangible assets have their own accounting standards?
no
What is a monetary asset?
financial assets that are easily convertible to cash
e.g. cash, savings accounts, debtors
An intangible asset is identifiable if it is…
- separable, i.e. capable of being separated from the entity and sold or transferred. licensed, rented and exchanged
OR - arises from contractual or other legal rights
When is an intangible asset recognised?
If it is;
- identifiable
- controlled
- potential economic benefits (R&D)
- its cost must be measurable
HAS TO MEET ALL 4 REQUIREMENTS!!!!
Under the cost model, if the book value is lower than the fair value, can you increase the book value?
No. But if it is opposite then you can decrease the BV
Under the revaluation model, if the book value is lower than the fair value, can you increase the book value?
Yes, but you cant recognise it as income because of prudence so it goes into the revaluation reserve
Whats an example of something that has no economical benefit?
SOME COVID-19 vaccines
All companies who developed vaccines that didn’t get approved
Development was an expense
If a cost isnt recognised in the balance sheet, where does it go?
It goes as an expense in the income statement
What are some examples of things that are NOT intangible assets (out of things you’d expect)?
Internally generated goodwill
Start-up costs
Training costs
Advertising costs
Market research
Research & Development
Relocation, reorganisation costs
Anything internally generated
Are customers intangible?
No, because you cant control them
Is a team of skilled staff intangible?
Unless it is protected by legal right to use them and obtain future economic benefits, no. Because you cant really control the expected economic benefits
Is goodwill an intangible asset?
As long as it’s not internally generated, it is one of the main intangible assets
Why is internally generated goodwill not recognised as an intangible asset?
Because there’s no evidence and it cant be measured reliably
If internally generated goodwill isn’t tested for impairment, what happens to it?
It’s amortised
When should amortisation start?
When the asset is available for use
What should the amortisation method reflect?
The pattern in which the asset’s future economic benefits are consumed
What is amortisation?
When you spread out the cost of something over time to match how long it will help the business.
If the pattern in which the asset’s future economic benefits are consumed can’t be predicted reliably, what should you do instead if amoritise?
Use the straight-line method
Where should the amortisation charge for each period be recognised?
in profit or loss
Should an intangible asset with an indefinite useful life be amortised?
No, it should be tested for impairment annually
How do you calculate amortisation?
Cost/useful life
What should expenditure on research recognised as?
An expense when its incurred
