IAS 38 - Intangible Assets are discussed regarding the conceptual framework. The components, definition, and recognition criteria are analyzed and explained along with examples. Amortisation and the residual value are explained. The intangible assets recon is also given.
Intangible assets - IAS 38
The nature of intangible assets:
• Non-current assets.
Intangible assets and IAS 38:
• Standard used to account for intangible assets: IAS 38
• Objective of IAS 38:
o Prescribe the accounting treatment for intangible assets.
o Recognise intangible assets only if certain criteria are met.
o How to measure the carrying amount of intangible assets.
o Specify the disclosure of intangible assets.
Scope of IAS 38:
• Applied to the accounting for intangible assets except when another standard
requires different treatment.
• Scope exclusions:
o Intangible assets held for sale in the ordinary course of business.
• Inventory
o Financial assets - IFRS 9 (trade receivables).
Definition of an intangible asset:
1. Identifiable
2. Non-monetary Asset
3. Without physical substance
Intangible assets and the conceptual framework:
• Asset: present economic resource controlled by the entity as a result of past events.
• An item first needs to meet the definition of an asset per the CF before we can look
at the intangible asset definition.
Intangible assets and IAS 1 classification:
Per the requirements of IAS 1 an asset is considered to be current if:
• It expected to realise the asset or intends to consume it in the normal operating
cycle.
• Holds the asset for the purpose of trading.
• Expects to realise the asset within 12 months after the reporting period.
• The asset is a cash or cash equivalent.
, • All other - non current.
Intangibles and the asset definition:
1. Present economic resource
2. Controlled by the entity
3. As a result of past events
Components of the intangible asset definition:
Identifiable:
• Separable => can be sold separately
• Arises from contractual rights => the right is specified in a contract or agreement.
Non-monetary:
• Not money held or an asset that we will receive in fixed or determinable amounts of
money.
Without physical substance:
• You cannot see or touch this asset.
Characteristics of intangible assets:
• An asset will only meet the definition of an intangible asset if:
o The asset is identifiable
o The entity controls the asset
o Future economic benefits will flow from the item.
Control:
• Power to obtain future economic benefits flowing from the item.
• Can restrict others from accessing the future economic benefits.
• Control often arising from a legal right.
Future economic benefits:
• Examples of future economic benefits:
o Revenue from the sale of goods or services
o Cost savings
When can intangible assets be recognised?
• An intangible asset shall be recognised if, and only if:
o It is probable that the expected future economic benefits that are
attributable to the asset will flow to the entity and
o The cost of the asset can be measured reliably.
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