Intangible Assets PAS 38

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identifiable non monetary asset without physical substance Intangible Asset
probable that future economic benefits that are attributable to the
asset will flow to the entity Conditions for recognition
cost of intangible asset can be measured reliably
Identifiability
Control Essential Criteria
Future economic benefits
separable
Identifiability
arises from contractual or other legal rights
power to obtain future economic benefits
restrict access of others to those benefits
Control
legal rights
revenue from sale
Future Economic Benefits
cost savings
Purchase Price + Transaction Cost

TC
import duties
Initial Measurement
nonrefundable purchase tax
directly attributable cost of preparing asset for intended use
• cost of employee benefits (bringing asset to working condition)
• cost of testing whether asset functioning properly
ALL directly attributable costs necessary to
create
produce
prepare asset

examples: Cost of internally generated IA

cost of materials and services used or consumed in generating
intangible asset
cost of employee benefits arising from generation
fees to register a legal right
amortization of patents and licences used to generate
internally generated
brands
mastheads Expensed when incurred
publishing title
customer lists
choose either
Cost Model Subsequent Measurement
Revaluation Model
Cost
- accumulated amortization Cost Model
- accumulated impairment loss
Revalued Amount
- subsequent amortization
- subsequent impairment loss Revaluation Model

*there must be an active market

systematic allocation of amortizable amount over useful life

Finite or Limited Life

over useful life Amortization
tested for impairment

Indefinite Life

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not amortized
annual test for impairment and when indicated to be impaired
Finite
- years or number of units to be produced
Useful Life
Indefinite
- no foreseeable limit
reflect pattern which economic benefits are consumed

if cannot be determined reliably

Method of amortization
Straight Line Method

begins when available for use

presumed ZERO
except:
Residual Value of Intangible Asset
third-party committed to buy at end of useful life
active market
These are organizational costs (expensed), except (choose 2)

a.)An analysis or survey of potential markets, products, labor

supply, transportation facilities, etc.

b.) Advertisements for the opening of the business.

Salaries and wages for who are being trained and their instructors.

c.) Travel and other necessary costs for securing prospective

d.) Costs related to obtaining licenses and other qualifications to
distributors, suppliers, or customers.
get into the business
d.) Costs related to obtaining licenses and other qualifications to
f.) Costs of buying business assets such as a building, equipment,
get into the business.
or vehicles.
e.) Salaries and fees for executives and consultants, or for similar
professional services.

f.) Costs of buying business assets such as a building, equipment,

or vehicles.

g.) any legal, management, consulting, accounting, and filing

fees.
(ESAAI)

Exchange
Intangible assets may be acquired through: Separate acquisition
Acquisition by bus. com.
Acquisition by gov'n grant
Internally generated (research and development*)
Acquisition by way of government grants are initially measured at
fv or nominal amount + directly attributable costs
____ or _____.
false
gain or loss arises if asset received is measured at carrying
amount of asset given up
(FV Given up
FV REceived
true/false?
CA Given up)
To determine whether an internally generated intangible asset Research phase
meets the recognition criteria, it is classified into : Development phase
-Cost model
Intangible assets are subsequently measured at either __ or __
-Revaluation model
Which of the following does not describe intangible assets?

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a. They lack physical existence.

b. They are financial instruments.

b. They are financial instruments.
c. They provide long-term benefits.

d. They are classified as long-term assets.

Which of the following characteristics do intangible assets pos-
sess?

a. Physical existence.
c. Long-lived.
b. Claim to a specific amount of cash in the future.

c. Long-lived.

d. Held for resale.

Which characteristic is not possessed by intangible assets?

a. Physical existence.

b. Long-lived. a. Physical existence.

c. Result in future benefits.

d. Expensed over current and/or future years.

Costs incurred internally to create intangibles are?

a. capitalized.

b. capitalized if they have an indefinite life. c. expensed as incurred.

c. expensed as incurred.

d. expensed only if they have a limited life.

Factors considered in determining an intangible asset's useful life
include all of the following except

a. the expected use of the asset.

d. the amortization method used.
b. any legal or contractual provisions that may limit the useful life.

c. any provisions for renewal or extension of the asset's legal life.

d. the amortization method used.

Which of the following costs incurred internally to create an intan-
gible asset is generally expensed?

a. Research and development costs.

a. Research and development costs.
b. Filing costs.
(internally generated*)
c. Legal costs.

d. All of these answer choices are correct.

The cost of an intangible asset includes all of the following except

a. purchase price. d. All of these choices are included.

b. legal fees.

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c. other incidental expenses.

d. All of these choices are included.

Under current accounting practice, intangible assets are classified
as

a. amortizable or unamortizable.
b. limited-life or indefinite-life.
b. limited-life or indefinite-life.

c. specifically identifiable or goodwill-type.

d. legally restricted or goodwill-type.

Companies should test indefinite life intangible assets at least
annually for

a. recoverability.
c. impairment.
b. amortization.

c. impairment.

d. estimated useful life.

One factor that is not considered in determining the useful life of
an intangible asset is

a. salvage value
a. salvage value
.b. provisions for renewal or extension.

c. legal life.

d. expected actions of competitors.

Which intangible assets are amortized?
Limited-Life Indefinite-Life

a. Yes Yes b. Yes No

b. Yes No
c. No Yes
d. No No
The cost of successfully defending a patent suit should be

a. charged off in the current period.

b. amortized over the legal life of the purchased patent.

d. amortized over the remaining estimated useful life of the patent.
c. added to factory overhead and allocated to production of the
product.

d. amortized over the remaining estimated useful life of the patent.

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