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Summary Intangible Assets IAS 38
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Summary of intangible assets with focus on internally generated intangibles.
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IntangibleAssets –
1. NATURE
IAS 38 - Identifiable
- Non-monetary
- Non-physical
- Can be used to generate economic benefits (Entity must control these)
IDENTIFIABLE ITEM:
- Assets from contractual or other legal rights
- Can be separately traded/ sold separately
Goodwill is not an intangible asset:
- Cannot be sold separately
- Do not arise from contractual or legal right
CONTRACTUAL ITEM:
- Power to benefit from asset (Power to restrict benefits to others)
- A contractual specialist employee can constitute an intangible asset
- Technical knowledge can be an intangible asset only if legal controls protection
FUTURE ECONOMC BENEFITS:
- Probable benefits will flow in
- Cost could be purchase price/ costs to develop
- Inflows are dependent on proving a market exists for product
- Stopped patents not recognised
LACK OF PHYSICAL SUBSTANCE:
- May be contained on a tangible item
- Most significant component is recognised, usually f one depends on the other then
recognise as tangible item
2. INITIAL MEASUREMENT
, - Must be recognised at cost
- Cost is cash consideration or fair value thereof
2.1 ACQUIRED INTANGIBLE ASSET:
- Cost = Purchase price (Excluding refundable taxes) + directly attributable costs
- If payment is deferred use Present value(PV) where FV-PV=INTEREST
TRANSFER WITH COMMERCIAL SUBSTANCE:
- Fair value of asset given up, otherwise
- Fair value of asset acquired, otherwise
- Carrying value of asset given up
ACQUIRED IN BUSINESS COMBINATION:
- Fair value at acquisition
- Not identifiable = Goodwill
- Assets and Liabilities acquired must be sold separately
FREE OF CHARGE:
- Fair value/ Nominal cost + Directly attributable costs
2.2 INTERNALLY GENERATED
- If you cannot measure cost, do not recognise items which have been researched and are in
development can be capitalised under conditions
INTERNALLY GENERATED GOODWILL:
- NOT RECOGNISED
BRANDS:
- DO NOT RECOGNISE
RESEARCH COSTS (For test purposes refer to textbook definition)
- Planned and original investigation conducted to develop new scientific breakthrough,
acquire knowledge or technical understanding
- Expense = happens before prospects of product * Add depreciation/ amortisation of
the other asset
DEVELOPMENT COSTS (For test purposes refer to textbook definition)
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