CHAPTER11:I

NTANGI
BLEASSETS

I
NTANGI
BLEASSETS-i
dent
if
iabl
enon-
monet
aryasset
swi
thoutphy
sical
subst
ance.

Essent
ialEl
ement
sofanI
ntangi
bleAsset
:
1.I
dent
if
iabi
l
ity-ani
ntangi
bleasseti
sident
if
iabl
ewheni
t:
a.i
sseparable,i
.e.
,capableofbei
ngseparatedanddivi
dedf r
om theenti
tyandsol
d,
t
ransf
erred,l
icensed,r
entedorexchanged,ei
theri
ndi
viduall
yortoget
herwitha
r
elat
edcont r
act.

b.ar
isesf
rom bi
ndi
ngar
rangement
sincl
udi
ngcont
ract
ual
orot
herl
egal
right
s.

2.Contr
ol-theenti
tyhast
heabi
l
ityt
obenef
itf
rom t
hei
ntangi
bleassetorpr
event
other
sfrom benef
iti
t.

3.Futur
eeconomicbenef
it
sorservi
cepotenti
al-mayincl
uderev
enuefr
om saleof
product
sorserv
ices,
costsav
ings,
orotherbenefi
tsr
esult
ingf
rom t
heuseoftheasset
bytheenti
ty.

RECOGNI
TION

Anint
angi
bleasseti
srecogni
zedi
fitmeet
sthedef
ini
ti
onofani
ntangi
bleasset
andt
herecogni
ti
oncrit
eri
aforasset
.

I
NITI
ALMEASUREMENT

-i
nit
ial
l
ymeasur
edatcost

-measur
ementofcostdependont
hemodeofacqui
sit
ion

ModeofAcqui
sit
ion Measur
ementofI
nit
ial
Cost

Pur
chase -pur
chasepr
icepl
usdi
rectcost
s

-i
fpaymenti
sdeferr
ed,
thecosti
s
hecashpr
t i
ceequiv
alent
.

Non-
exchangeTr
ansact
ion -
fai
rval
ueatacqui
sit
iondat
e

Exchange -w/commer
cial
subst
ance(
inor
der
ofpr
ior
it
y)
 a)FVofassetgiv
enup(
pluscashpai
d
l
esscashreceiv
ed

b)FVofassetr
ecei
ved

c)CAofassetgiv
enup( pl
uscash
pai
dlesscashrecei
ved)

-w/
outcommer
cial
subst
ance:

CAofassetgi
venup(
pluscash
pai
dlesscashr
eceiv
ed)

(Peculi
armeasur
ementi
smadewhent
heI
ntangi
bleAsseti
sint
ernal
ygener
atedorsel
f-
generated)

I
NTERNALGENERATI
ONOFI
NTANGI
BLEASSET

-toassesswhet
heranint
ernal
l
ygenerat
edint
angi
bleassetmeet
sthecr
it
eri
afor
r
ecognit
ion,
anenti
tycl
assi
fi
esthegener
ati
onoftheasseti
nto:

a.r
esear
chphase
-ori
ginal
andplannedinvesti
gati
onunder
takenwi
ththeprospectof
gai
ningnewscient
if
icandtechnicalknowl
edgeandunder
standi
ng.

-expendi
tur
esi
nthi
sphasear
er zedasEXPENSE.
ecogni

b.dev
elopmentphase
-t
heappl i
cat
ionofr
esear
chf i
ndingsorotherknowl
edet
oaplanordesi
gn
fort
heproducti
onofneworsubstanti
alimprov
ement sbef
oret
hest
artof
commercialpr
oducti
onoruse.
-expensesar
ecapi
tal
izedi
ftheent
it
ycandemonst
rat
eal
loft
he
f
oll
owi
ng:

i
. Techni
cal
feasi
bil
i
tyofcompl
eti
ngt
hei
ntangi
bleasset

i
i
. I
ntent
iont
ocompl
etet
heI
ntangi
bleAsset

i
i
i. Abi
l
ityt
ouseorsel
ltheI
ntangi
bleAsset

i
v. Pr
obabl
efut
ureeconomi
cbenef
itorser
vicepot
ent
ial

v
. Av
ail
abi
l
ityofadequat
eresour
cesneedet
ocompl
etet
hedev
elopmentandt
o
 useorsel
lthei
ntangi
bleasset
;and

v
i. Rel
i
abl
emeasur
ementoft
hecostoft
hei
ntangi
bleasset

 i
fiti
snotcl
earwhet
heranexpendi
tur
eisar
esear
choradev
elopmentcost
,it
shal
lbet
reat
edasaresear
chcost

 r
einst
atementofexpendi
tur
epr
evi
ousl
yrecogni
zedasanexpensei
spr
ohi
bit
ed

 Sell
i
ng, admi nist
rati
veandothergener
alover
head,cost
sofi
neef
ici
ences,i
nit
ial
operat
ingl osses,andtrai
ningcost
sareexpensedandshal
lnotf
orm par
tofthe
costoft heintangibl
easset

 subsequentexpendi
tur
esonr ecogni
zedint
angibl
easset
saregenerall
yexpensed,
unl
esstheymeett hedefi
nit
ionofanint
angibl
eassetandtheassetrecogni
ti
on
cri
ter
ia

SUBSEQUENTMEASUREMENT

-i
ntangi
bleAsset
sar
esubsequent
lymeasuredatcostl
essanyaccumul
ated
ammor
ti
zati
onandanyaccumul
atedimpair
mentlosses.

Ammor
ti
zat
ion

-
thesyst
emat
ical
l
ocat
ionoft
hedepr
eci
abl
eamountofani
ntangi
bleassetov
er
i
tsusef
ulli
fe

-
Int
angi
bleasset
sar
ecl
assi
fi
edaccor
dingt
othei
rusef
ull
i
fe:

a.I
ndef
ini
teLi
fe
-nofor
eseeabl
eli
mittot
heper i
odoverwhi
chiti
sexpect
edt
opr
ovi
de
economicbenef
it
sorservi
cepotent
ialt
otheenti
ty.

-notammor
ti
zedbutt
est
edf
ori
mpai
rmentatl
eastannual
l
y

b.Fi
nit
eLi
fe
-l
i
mit
edper
iodt
obenef
itt
heent
it
y

-ammor
ti
zedusi
ngt
hest
rai
ghtl
i
nemet
hodov
eraper
iodof2-
10y
ear
s

-resi
dual
val
ueisassumedt obezer
oexceptwhentherei
sathir
dpar
ty
commi
tmenttopur
chasetheassetatt
heendofit
suseful
lif
eorther
eisan
 acti
vemar
ketwher
etheent
it
yexpect
stosel
ltheassetatt
heendofi
tsusef
ul
l
ife.

I
MPAI
RMENT

-anenti
tyisrequi
redtotestfori
mpair
mentanintangi
bleassetw/indef
ini
te
useful
lifeoranintangi
bleassetnotyetav
ail
abl
eforuseatleastannual
l
yorwhenev er
ther
eisani ndi
cati
onofi mpair
ment.

DERECOGNI
TION

-I
ntangi
bleAsset
sareder
ecogni
zedwheniti
sdi
sposedorwhennof
utur
e
economi
cbenefit
sorservi
cepot
enti
ali
sexpect
edfr
om t
heasset.

-Onderecogni
ti
on,t
hediffer
encebet
weenthecarr
yingamountandthenet
di
sposalpr
oceeds,i
fany,
isrecogni
zedasgainorl
ossinsurpl
usordefeci
t.