A220 - INTERMEDIATE ACCOUNTING 1

MIDTERM REQUIREMENT

REFLECTION PAPER

Real Excellence Online (REO) Webinar on Intermediate Accounting (FAR):

INTANGIBLE ASSETS (PAS 38)

Held on Saturday, December 17, 2022

Via Live in Real Excellence Online (REO) CPA Reviewer FB Page

Submitted by:
MOLINA, Dianna Lynn L.
BSA-2 Block 4

Submitted to:
Ma’am Remedios A. Palaganas, CPA, MBA
Instructor
PART I: About the Guest Speaker
In the free online webinar held by Real Excellence Online (REO) CPA
Review on December 17, 2022, Prof. Karim G. Abitago, CPA, once again,
became the lecturer with the topic of intangible assets. He claims to be one of
REO's high caliber reviewers. Additionally, he became the 1st placer on the May
2016 CPA Licensure Exam.
The webinar lasts for almost two hours. Our time on the webinar was well
spent as we learned a lot from his discussion. With his way of teaching, the
webinar isn't wasted a single second. Once again, he explained everything
without difficulty and made sure the viewers understood what he was saying. He
used terms that students could easily understand, just like what he did from his
previous webinars, and I can tell that it’s very effective to most of us. He also
cracked jokes during the webinar to keep us entertained. It was evident from the
way he explained his knowledge that he was passionate about delivering it.
Students, particularly, have commented on how well he explains FAR concepts in
his lectures. Whenever there is a conflicting viewpoint, he demonstrates how this
idea can be applied.
Prof. Karim G. Abitago, CPA, achievements:
● Topnotcher, Top 1, May 2016 CPALE
● Former Audit Associate, SGV Co-CPA Reviewer, CPAR
● FAR CPA reviewer in various review schools
● Outstanding Educator – ACLADEB
PART II: Summary of the Webinar
On December 17, 2022, the REO held a free webinar. The objectives of
the webinar were to discuss one of the sub-topics of Intermediate Accounting
(FAR), which is the intangible assets.
Prof. Karim Abitago, CPA discussed the definition of intangible assets, its
characteristics, its initial measurements that are a) externally acquired and b)
internally generated, the subsequent measurement of intangible assets that have
a) finite useful life and b) indefinite useful life, the major categories of intangible
assets, also the examples of intangible assets within the scope of PAS 38 and
explained their accounting requirements.
According to PAS 38, intangible asset is an identifiable non monetary
asset without physical substance. Intangible asset has 4 essential
characteristics: first is the identifiability, an intangible asset is identifiable when it
is separable, it arises from contractual or other legal rights regardless of
separability. Second is non-monetary, an intangible asset is non-monetary if they
are not readily converted into a fixed amount of money in the short term. Their
value can change over time in response to economic conditions. The amount that
can be obtained for these assets can vary, since there is no fixed rate at which
they go into cash. Third is no physical form. Lastly is the control, it is the power of
the entity to obtain the future economic benefits flowing from the intangible asset
and restrict the access of the others to those benefits.
According to PAS 38, an intangible asset shall be measured INITIALLY at
COST. Measurement of cost depends on how the intangible asset is acquired. It
could be acquired through: (a) separate acquisition (cash or on account), (b)
deferred settlement basis (If the payment for an intangible asset is deferred
beyond normal credit terms, the cost is the cash price equivalent), (c) acquisition
through business combination (If an intangible asset is acquired in a business
combination, the cost of the intangible asset is based on the fair value on the
date of acquisition), (d) exchange, if the exchange has commercial substance,
the intangible asset acquired initially measured using the following order of
priority: 1) Fair value of the asset given up plus cash period or minus cash
received. 2) Fair value of the asset received. 3) Carrying amount of assets given
up plus cash paid or minus cash received. If the exchange lacks commercial
substance, the intangible asset is initially measured at the carrying amount of
asset given up plus cash paid or minus cash received. (When the asset lacks
commercial substance or when fair value of assets are not available, there is no
gain or loss on exchange), (e) internally generated, in internally generated asset
it will go through research phase (recognized as expense) and development
phase (capitalized only if all of conditions under PAS 38 are met). If it is not clear
whether an expenditure is a research phase or a development phase, it is treated
as a research phase. Reinstatement of costs already expensed is prohibited.
Internally generated brands, mastheads, publishing titles, customer lists and
goodwill are not intangible assets but expensed outright.
Intangible assets are subsequently measured using the cost model or the
revaluation model. The revaluation model is applicable only when the intangible
asset has an active market.
The concept of amortization is that amortization is the systematic
allocation of the depreciable amount of an intangible asset over the asset’s
useful life. it shall begin when the asset is available for use and ceases when the
asset is derecognized or when classified as held for sale whichever is earlier.
only intangible assets with finite or limited life are amortized over their useful life.
There are factors of amortization: (1) amortizable amount, (2) useful life (finite
useful life – not amortized but tested for impairment at least annually using pas
36 or indefinite useful life – amortized using the straight line method (unless
another method better reflects the consumption of the economic benefits from
the asset) over the shorter of the asset’s useful life and legal life, if any). (3)
residual value, the residual value of an intangible asset shall be presumed to be
zero, unless the entity has the ability to sell the asset at the end of its useful life.
According to PAS 38, the amortization used shall reflect the pattern in which the
asset’s future economic benefits are expected to be consumed by the entity. If
the pattern cannot be determined reliably, the straight-line method shall be used.
The basis of amortization is either the intangible assets’ useful life or legal life
whichever is shorter. The amortization charge for each period shall be
recognized in profit or loss unless amortization is required to be included in the
carrying amount of another asset.
Subsequent costs. As a rule, a subsequent expenditure on an intangible
asset shall be recognized as an expense. However, the subsequent expenditure
may be capitalized or added to the cost of the intangible asset if it met the
recognition criteria for intangible assets.
Under US GAAP, intangible assets have the following major categories:
(1) marketing related, (2) customer related, (3) artistic related, (4) contract
related, (5) technology related, and (6) goodwill.
PART III: What I have Learned
Again, it was an honor to participate in the webinar with Prof. Karim
Abitago, CPA. As in the previous webinar with Prof. Abitago, when we discussed
inventories, I have gained a lot of knowledge about intangible assets. It was great
to learn new things again that will be of great help to me and my major classes.
I've learned a lot throughout the discussion. For instance, what are intangible
assets, what are their essential characteristics, how are they measured,
amortized, and what are the major categories. However, I found Prof. Abitago's
discussion of the major categories under US GAAP to be the most informative;
I've learned a lot from his excellent explanations of these categories.
Nevertheless, I believe there are some things I need to study about intangible
assets and FAR on my own. As Prof. Karim said in his previous webinar, we must
keep reading and practicing what we have learned to master the concept, and
spend more time studying it and understanding it. Despite its broad scope, FAR
is an important topic in our accounting journey, as Prof. Abitago mentioned.
Overall, Prof. Abitago's webinars have been extremely beneficial to me.
I'm looking forward to another webinar with him.
PART IV: E-Certificate and Documentary