Intangible assets

Intangible assets - IAS 38

Non-monetary assets without physical substance

Costs adding value are capitalized and then expensed over their useful life

IA Criteria - all be met (3)

1. Asset is identifiable

   1. Separable/transferable

   2. arise from contractual or legal rights

2. Entity controls future economic benefit of asset

3. Asset generates future economic benefits

Initial measurement of IA once criteria are met - 2 criteria

1. probable that future economic benefits flow to entity

2. cost can be reliably measured

Measure at cost of FV

1. Dr. IA

   1. Cr. Cash

Capitalized costs

Direct

• purchase

• legal

• non-refundable taxes

Directly attributable

• testing

• customization

Legal fees to defend trademarks

Internally generated IA

Expenditures relating to internal development can be capitalized if specific criteria is met

IAS 38.63 lists exclusions (brands, customer lists)

2 phases: Research and Development

Research cost guidance for IA

All costs are expensed as entity cannot determine future benefits

Ex: knowledge, findings, alternatives

Development cost guidance for IA

Capitalize costs after the point all criteria are met

Development cost capitalization criteria all met (6)

1. Feasibility of completion

   1. can asset be completed

2. Intent to complete

   1. does entity plan to complete

3. Ability to use or sell

   1. use once completed

4. Probable future benefits

   1. will it generate value

5. Adequate finances to complete

   1. does entity have means to do so

6. Ability to measure expenditures reliably

Subsequent measurement of IA

Cost (cost - acc. amort - acc. impairment)

IFRS revaluation model (FV - Acc. amort - acc. impairment)

Impairment of IA under IFRS

Impairment under IFRS is higher of

• FV - costs of disposal

• value in use

IA under ASPE

Choice of whether to capitalize or expense

Only cost model is used

Impairment is CV vs recoverable amount, write-down to FV

Presentation and disclosure of IA

Disclose amortization method, if useful life is finite, r&d considered, CV