IAS 38 (Intangible Assets)

DAIF Chapter 4

Intangible

Identifiable non-monetary asset

Does not include internally generated goodwill

Without physical substance

(Licenses, trademarks (brand name), Market knowledge, Intellectual property)

Three Keys

Identifiability (Asset, separable from entity, capable of being sold or transferred, have contractual or legal rights)

Control (Has power, future economic benefits)

Future economic benefits (Revenue from the sale of products, cost savings, other benefits)

Recognition

Probable (Future economic benefits)

Cost of assets (reliably measured)

In financial statement (initially cost price)

Not recognized (internally generated goodwill, internally generated brands)

Research & Development

Internally generated intangible assets to make new products, new processes

Research

Activity

To obtain new knowledge, searches for alternative (materials, products, processes)

Revenue expenditure (SPLOCI - expense)

Development

Application of research findings, other knowledge (Improved - materials, devices, products, processes, systems, services for commercial use)

Criteria for development

Met criteria (capitalized - SFP - NCA, amortization)

Not met - SPLOCI - expense

Criteria for recognition as development

(S) Its ability to use or sell

(E) Its ability to measure the expenditure reliably

(C) Its intention to complete

(T) Technical feasibility

(O) Overall profit

(R) Availability of resources

Measurement

Initially - measured by cost

Life - finite (limited life)

Indefinite (no limit)

Finite (limited life)

Amortize by useful life

By beneficial pattern

Can’t decide pattern - use straight line method

Recognized as expense in SPLOCI

Residual value assumed to be zero

Amortization period - reviewed annually

Indefinite (no limit)

No amortization

Review useful life annually