Lecture Notes on Chapter 7 Intangible Assets

Flashcards covering definitions, initial measurement, types, R&D phases, amortization, and internal controls for intangible assets based on PAS 38 and IAS 36.

Intangible Assets

Non-physical resources that provide long-term value and a competitive advantage to a business, which can be identifiable or unidentifiable.

True

True or false: The standard stating an intangible asset is recognized if it is probable that expected future economic benefits will flow to the entity and the cost can be measured reliably.

Capitalization Threshold

A materiality limit (e.g., PHP 50,000) set by entities below which items are expensed for simplicity rather than capitalized.

Trademark

Exclusive right to use a mark and prevent others from using similar marks; renewable for 10-year periods after the original 10-year term.

Copyright

Exclusive right to reproduce and sell an artistic or literary work; valid for the lifetime of the author plus 50 years after the author's death.

Franchise

The right to sell products, render services, or use trademarks within a designated geographical area.

Patent

Exclusive right for a new, inventive, and useful product or process, with a legal life of 20 years or useful life, whichever is shorter.

Software

A collection of instructions enabling a user to perform tasks using computer hardware, amortized over its estimated useful life.

Goodwill

The excess of purchase price over the fair value of net identifiable assets when acquiring an existing business; possesses an indefinite life.

Research Phase

The phase of an R&D project where all costs are charged to expense immediately.

Development Phase

The phase where costs are capitalized only after technological and commercial feasibility have been established.

Finite Useful Life Assets

Assets like patents and software that are amortized over their useful life or legal life, whichever is shorter.

Indefinite Useful Life Assets

Assets like goodwill or renewable trademarks that are not amortized but must undergo a mandatory annual impairment test.

Impairment testing

recognizing a loss if the Carrying Amount is greater than the Recoverable Amount.

Recoverable Amount

The higher of Fair Value Less Costs of Disposal or Value in Use.

Dual Authorization

A financial integrity control requiring two levels of approval for the acquisition of intangible assets to prevent unauthorized spending.

Segregation of Duties

An internal control ensuring the person recording the asset in the accounting system is different from the person who has custody of it.

Intangible Asset Register

A master list with unique IDs that must be maintained and reconciled monthly to the General Ledger.

IPOPHL

where trademarks, patents, and copyrights should be formally registered.

Non-Disclosure Agreements (NDAs)

Contractual safeguards used to prevent employees and partners from leaking trade secrets.

Assignment Clauses

Employment contract clauses that assign the rights of any work created by the employee to the company.

Role-Based Access Control (RBAC)

An IT control limiting access to sensitive data only to those who need it for their specific job.

Multi-Factor Authentication (MFA)

A security layer requiring a second point of verification before accessing intellectual property systems.

Encryption

The protection of digital IP ensuring it is secure both 'at rest' (on the server) and 'in transit' (when being shared).

Clean Desk Policy

An operational control requiring employees to clear sensitive information from their desks at the end of the day.

Trigger Events

Indicators of loss such as a drop in market value or adverse technological changes that prompt an impairment review.