IAS 38 Intangible Assets - Vocabulary

Vocabulary flashcards covering key terms from the IAS 38 lecture notes on recognition, measurement, and impairment of intangible assets, including related concepts like goodwill and cloud computing arrangements.

Intangible asset

An identifiable non-monetary asset without physical substance that is controlled by the entity and expected to generate future economic benefits; identifiable apart from goodwill.

Identifiable

Capable of being separated from the entity or arising from contractual rights; distinguishable from goodwill.

Non-monetary asset

An asset not expressed in monetary terms; it does not take the form of cash or a claim to cash.

No physical substance

Lacks tangible form; intangible in nature.

Control

Power to obtain future economic benefits from an asset, usually supported by a legal right or license.

Future economic benefits

Expected cash inflows or other benefits from using or selling the asset.

Recognise

Record an asset on the balance sheet when recognition criteria are met.

Initial measurement

Amount at which the asset is recognised initially, typically cost (or fair value if acquired in a business combination).

Cost

The purchase price plus directly attributable costs; excludes general overheads; may be discounted if payment terms are extended.

Separately acquired

An intangible asset acquired on its own, measured at cost unless arising in a business combination.

Fair value

The price to receive to sell an asset or to transfer a liability in an orderly transaction.

Business combination

Acquisition of a business; identifiable assets acquired are measured at fair value at the acquisition date.

Internally generated

Assets produced within the entity; development costs may be capitalised, while research costs generally cannot.

Development costs

Costs to bring an internally generated asset to working condition; capitalised if criteria (feasibility, intent, ability, market, resources, reliable measurement) are met.

Research costs

Costs incurred during the research phase that cannot be recognised as assets and are expensed as incurred.

Goodwill

Asset arising in a business combination representing future economic benefits; has indefinite life and is not amortised but impairment-tested.

Active market

A market with sufficient frequency and volume to provide pricing information; required for the revaluation model.

Revaluation model

Subsequent measurement at fair value (if an active market exists); changes may go to OCI or P&L depending on prior movements.

Cost model

Subsequent measurement at cost minus amortisation and impairment.

Amortisation

Systematic allocation of cost over the asset’s useful life using a chosen method (straight-line, units of production, diminishing balance).

Useful life

Period over which the asset is expected to generate benefits, or the number of production units expected from the asset.

Definite useful life

Finite useful life; amortisation is recognised over this period.

Indefinite useful life

No foreseeable limit to benefits; impairment testing is required; goodwill commonly has this life.

Impairment

Reduction in carrying amount when recoverable amount is less than carrying amount; tested under IAS 36.

Cloud computing arrangement

Service where the buyer accesses software via the provider’s infrastructure; typically no license; payments are operating expenses; prepayments may be capitalised.

Service vs license (cloud)

SaaS-like arrangements usually do not provide identified assets; if there is a right to control identified assets, recognition as intangible may occur.

Start-up costs

Costs incurred before opening that are not recognised as intangible assets.

Training costs

Costs of training employees; expensed as incurred.

Advertising and promotion costs

Costs to promote products; expensed rather than capitalised as intangible assets.

Relocation costs

Costs of moving facilities or operations; expensed.

Reorganisation costs

Costs related to structural changes; expensed and not recognised as intangible assets.