ias 38 - intangible assets

an intangible asset is

- identifiable

- non monetary

- asset

- without physical substance

identifiable

- separable (can be sold separately)

- arises from a contractual right

non-monetary

it is not money held or an asset that we will receive in fixed/determinable amounts of money

without physical substance

we cannot see/touch this asset

characteristics of intangible assets

- identifiable

- control

- future economic benefits will flow from the item

control

- the entity's ability to direct the use of the asset and obtain future economic benefits that may flow from it

- control prevents other entities from accessing the future economic benefits

recognition criteria

- definition of an intangible asset

- it is probable that economic benefits will flow to the entity

- cost can be reliably measured

examples of intangible assets

- copyrights

- patents

- computer software

- fishing licenses

- franchises

- restraint of trade agreements

the cost of a separately acquired intangible asset comprises:

- its purchase price (including import duties and non-refundable taxes after deducting trade discounts and rebates)

- any directly attributable cost of preparing the asset for its intended use

examples of directly attributable costs are:

- cost of employee benefits directly related to bringing the asset to its working condition

- professional fees

- costs of testing the intangible item

internally generated goodwill

not recognised as an asset

why is internally generated goodwill not recognised as an asset?

it is not an identifiable resource controlled by the entity that can be measured reliably at cost

measurement of intangible assets after recognition

- cost model

- revaluation model

residual value for intangible assets with a finite useful life is assumed to be nil unless:

- there is commitment by a third party to buy the asset at the end of its useful life

- there is an active market for the asset (residual value can be determined & it is probable that the market will exist at the end of its useful life)

amortisation

the systematic allocation of the depreciable amount of an intangible asset over its useful life

useful lives of intangible assets

- finite

- indefinite

finite useful life

- amortise at each financial year end

- test for impairment when there is an indicator

indefinite useful life

- no amortisation

- test for impairment annually and when there is an indicator for impairment

an intangible asset shall be derecognised...

- on disposal

- when no future economic benefits are expected from its use/disposal