IAS 38 INTANGIBLE ASSETS EXTRACTS

INTANGIBLE ASSETS
Initial Recognition
1. Intangible Asset
a. Distinction between Tangible and Intangible assets (4 5)
i. Tangible vs non tangible part
ii. Amortization vs Depreciation
b. Definition
i. No physical substance
ii. Non-monetary (Ref IAS 21)
iii. Asset (def)
1. Controlled by entity (13 16)
a. Legal patent, copy rights
b. Active Market
2. Future economic benefits (17)
a. Revenue
b. Reduction in costs
iv. Identifiable (12) Goodwill is not identifiable hence not IA (48
50)
1. Separable
2. Contractual/legal rights (may be exclusive)
c. Recognition Criteria (21 23)
i. Probable future economic benefits
ii. Costs measured reliably Internally generated Brands,
mastheads, publishing titles, customer list not recognized as IA
(63)
d. IA Examples
i. Computer software
ii. Externally purchased Development project
iii. Brands & Trade marks
iv. Externally purchased Patents to sell some invention product
v. Copyrights literary works
vi. Motion picture films exclusive rights
vii. Customer lists
viii. Franchises/ Licenses
ix. Fishing rights/Landing rights
x. Imports/exports quotas
e. Cannot be recognized as IA because?
i. Advertisement cost
ii. Training costs
iii. Market share
iv. Customer loyalty
v. Goodwill
2. Acquisition methods
a. Purchased (25-47) Ref IAS 16
b. Internally generated assets (51 53)
i. Research & Development Costs
1. Research Phase
IAS 38 INTANGIBLE ASSETS EXTRACTS

BILAL ZIA

IAS 38 INTANGIBLE ASSETS EXTRACTS

a. Research Original and planned investigation to

gain new knowledge (def)
b. Expensed out
i. Research costs are always expensed out (54
55)
ii. If distinction is unclear all costs are expensed
out (53)
iii. Once expensed cannot be capitalized
afterwards (71)
2. Development Phase (57 62)
a. Development application of research finding
before commercial production/use (def)
b. Examples: prototypes, pilot plants, designs (59)
c. Criteria (57)
i. Intention and ability
ii. Technical feasibility
iii. Market feasibility
iv. Financial feasibility
v. Cost can be reliably measured
3. Commercial production phase
c. Assets acquired as result of business combination (P acquires C) (33
3 4)
i. Fair value is determinable intangible asset
ii. Fair value is not determinable Goodwill
Subsequent Recognition (65 128)
1. Subsequent expenditures
a. Most likely to be expensed out
2. Recognition methods
a. Cost model
b. Revaluation model
3. Amortization of Intangible Asset
a. Intangible asset with indefinite useful life
b. Intangible asset with definite useful life(lower of):
i. Legal life
ii. Useful life

IAS 38 INTANGIBLE ASSETS EXTRACTS

BILAL ZIA