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Intangible Asset Definition It is an identifiable non monetary asset without physical substances.

Examples of intangible assets are patents rights motion picture films, computer software, copy right etc. As 26 deals with intangible assets. An asset should have three important criteria to be rercognized as intangible assets a) Identifiability: an asset is identifiable if it is either separable or arises from contractual or other legal rights. b) Controls: power of an entity to obtain future benefits. c) Future economic benefits
Accounting Guidance: Intangible assets should be classified as capital assets. Additionally, before an intangible asset can be recognized in the financial statements, it must meet one or both of the following criteria: The asset is separable, that is, the asset is capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, asset, or liability. The asset arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations. If the types of intangible assets reported by entity differ in nature and usage, then they should not be reported collectively as a single major class of capital assets (e.g., intangible assets). For example, the nature and usage of patents differs from that of right-of-way easements such that they should not be aggregated in the same major class of capital assets. There are two type of intangible assets a) Purchased b) Internally generated a) purchased - when purchased purchase price including import duties and taxes, any cost incurred for preparing the assets for its intended use are included. b) When acquired from government on grants an entity may choose to recognize both the intangible asset and the grant at fair value or to recognise the asset initially at a nominal value plus direct expenditures. Internally generated intangible asset eg R&D, Computer soft ware internally generated in an organisation, trade mark, trade dress, internet domain, customer list, play operas etc

Amortisation policy Amortisation means paying off. review all assets to look for any indication that an asset may be impaired (its carrying amount may be in excess of the greater of its net selling price and its value in use).9] The recoverable amounts of the following types of intangible assets should be measured annually whether or not there is any indication that it may be impaired. IAS 36 has a list of external and internal indicators of impairment. [IAS 36. and from its disposal at the end of its useful life Identifying an Asset That May Be Impaired At each balance sheet date. the . IMPAIREMENT of an assets Impairment: an asset is impaired when its carrying amount exceeds its recoverable amount Carrying amount: the amount at which an asset is recognised in the balance sheet after deducting accumulated depreciation and accumulated impairment losses Recoverable amount: the higher of an asset's fair value less costs to sell (sometimes called net selling price) and its value in use Fair value: the amount obtainable from the sale of an asset in an arm's length transaction between knowledgeable. Intangible assets having finite useful life are amortised over a period over useful life. willing parties Value in use: the discounted present value of the future cash flows expected to arise from: y y the continuing use of an asset. If there is an indication that an asset may be impaired. Intangible asset having indefinite useful life are tested for impairement annually. In some cases. then you must calculate the asset's recoverable amount.

an indication that an asset may be impaired may indicate that the asset's useful life. that are expected to benefit from the synergies of the combination. with the recoverable amount of the unit: [IAS 36.96] To test for impairment. . the unit and the goodwill allocated to that unit is not impaired.12] External sources: y y y y market value declines negative changes in technology. If the carrying amount of the unit exceeds the recoverable amount of the unit. depreciation method. markets. [IAS 36. economy.17] Impairment of Goodwill Goodwill should be tested for impairment annually. the entity must recognise an impairment loss. irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units. [IAS 36. or laws increases in market interest rates company stock price is below book value Internal sources: y y y obsolescence or physical damage asset is part of a restructuring or held for disposal worse economic performance than expected These lists are not intended to be exhaustive. including the goodwill.most recent detailed calculation of recoverable amount made in a preceding period may be used in the impairment test for that asset in the current period: [IAS 36.80] y y represent the lowest level within the entity at which the goodwill is monitored for internal management purposes. A cash-generating unit to which goodwill has been allocated shall be tested for impairment at least annually by comparing the carrying amount of the unit. [IAS 36. goodwill must be allocated to each of the acquirer's cash-generating units. Each unit or group of units to which the goodwill is so allocated shall: [IAS 36. and not be larger than an operating segment determined in accordance with IFRS 8 Operating Segments. or residual value may need to be reviewed and adjusted.13] Further. or groups of cash-generating units.90] y y If the recoverable amount of the unit exceeds the carrying amount of the unit.10] y y y an intangible asset with an indefinite useful life an intangible asset not yet available for use goodwill acquired in a business combination Indications of Impairment [IAS 36.

further allocation of the impairment loss is made pro rata to the other assets of the unit (group of units). The carrying amount of an asset should not be reduced below the highest of: [IAS 36.104] y y first. Goodwill on acquisitions of controlled entities is included in intangible assets. If the preceding rule is applied. and then. reduce the carrying amounts of the other assets of the unit (group of units) pro rata on the basis. Measurement Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the entity share of the net identifiable assets of the acquired controlled entity/associate at the date of acquisition.105] y y y its fair value less costs to sell (if determinable). and zero. reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of units). Recognition An item is recognised as an intangible if it meets the definition of an intangible asset. Goodwill on acquisitions of associates is included in investments in associates. it is probable that future economic benefits will flow to the University and the cost of the asset can be reliably measured.The impairment loss is allocated to reduce the carrying amount of the assets of the unit (group of units) in the following order: [IAS 36. . its value in use (if determinable).

After initial recognition. services. The expenditure capitalised comprises all directly attributable costs. Research and Development . Goodwill is tested for impairment annually. including costs of materials. after considering its commercial and technical feasibility. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will. Costs capitalised include external direct costs of materials. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Amortisation is calculated on a straight-line basis over the assets¶ estimated useful life of 5 years. Computer Software Computer software is carried at cost less accumulated amortisation and impairment losses. and is carried at cost less accumulated impairment losses. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. usually 20 years. services. Licences Licences that have a finite useful life are carried at cost less accumulated amortisation and impairment losses. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software. be completed and generate future economic benefits and its costs can be measured reliably. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use on a straight-line basis over its estimate useful life. direct payroll and payroll related costs of employees¶ time spent on the project. Amortisation is calculated using the straight-line method to allocate the cost of the assets over their estimated useful lives.Patents Research expenditure is recognised as an expense as incurred. goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Licences that have an indefinite useful life are not amortised and are assessed for impairment annually. . Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. direct labour and an appropriate allocation of overheads.