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 subtopics of Intermediate Accounting
(FAR), which is the intangible assets.
Prof. Karim Abitago, CPA discussed the definition of intangible assets,
its characteristics, its measurements, and the major categories of intangible
assets.

➔ INTANGIBLE ASSET
According to PAS 38, intangible asset is an identifiable non monetary
asset without physical substance.
➔ ESSENTIAL CHARACTERISTICS OF INTANGIBLE ASSETS
1. Identifiability (separable or arises from contractual or other legal
rights)
2. Non-Monetary
3. No Physical Form
4. Control

➔ INITIAL MEASUREMENT
- 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
c. ACQUISITION THROUGH BUSINESS COMBINATION
d. EXCHANGE (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
● RESEARCH PHASE - recognized as expense
● 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.
➔ IMPORTANT NOTES ON RESEARCH & DEVELOPMENT
1. If an entity cannot distinguish the research phase from the
development phase, the activity shall treat the expenditure as if it
were incurred in the research phase only.
2. In process R&D acquired separately or in a business acquisition is
recognized as an asset even if a component is a research.
Accordingly, the subsequent expenditure is recognized as an
expense if it is a research expenditure. The subsequent
 expenditure is added to the carrying amount of the in-process
research and development project if it is a development
expenditure that satisfies the recognition criteria for an intangible
asset.
3. The cost of PPE, materials and intangible assets acquired and
used in R&D activities is included in R&D expense follows:
● If the item of PPE, material or intangible asset has an
alternative use, it is part capitalized and will form part of R&D
expense upon usage or consumption (e.g. depreciation)
● If the item of PPE, material or intangible asset has no
alternative use, the cost is expensed immediately in its
entirety as R&D expense.
4. Internally generated brands, mastheads, publishing titles, customer
lists and goodwill are NOT INTANGIBLE ASSETS but expensed
outright.

➔ SUBSEQUENT MEASUREMENT
- 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.
➔ CONCEPT OF AMORTIZATION
- Amortization is the systematic allocation of the depreciable amount
of an intangible asset over the asset’s useful life.
- Amortization Period: Amortization 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.
- Rule on Amortization: ONLY intangible assets with FINITE OR
LIMITED LIFE are amortized over their useful life.
➔ Factors of Amortization:
a. AMORTIZABLE AMOUNT
b. USEFUL LIFE
● FINITE USEFUL LIFE – not amortized but tested for
impairment at least annually using PAS 36.
● 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.
c. 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.
➔ AMORTIZATION METHOD
- 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.
➔ PRESENTATION OF AMORTIZATION EXPENSE
- 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 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.

➔ MAJOR CATEGORIES
- 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
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.
All the way through the discussion, I learned a lot. For instance, how intangible
assets are defined, their essential characteristics, measurement, amortization,
and the major categories. In addition to these, there are rules, a period, and a
method. However, I found it most informative when he discussed the five major
categories under US GAAP. With his excellent explanations of these categories, I
understood all five major 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.
Prof. Abitago’s webinars are so helpful to me that I look forward to
participating in another one.
PART IV: E-Certificate and Documentary