IAS 38 – Intangibles Summary

Prepared by Akash Mukesh Kumar - AMK

❹ Recognition Criteria
IAS 38 Intangibles Summary
❶
The expected inflow of Cost must be
Intangible Future economic benefits And reliably measurable
from the asset must be
probable;

Identifiable Non- Monetary Asset Without Physical ❸

Substance
Two Stages for Capitalization
- A resource
We control the asset controlled by the Research Development
Separable Arises from
entity
Contractual or Legal - As a result of past Treatment
3. Capable of being: If we can
Rights events
 Separated - From which an Expense Out
6 Conditions Met “N1”
Restrict access to the
 Sold, These rights must be
FEB; and
inflow of Future
considered even if they are: economic benefits Reasons
Transferred,
 not transferrable or are expected
licensed or separable Yes
Have the power to No
exchanged  from the entity or Research is merely a project to investigate if
from other rights and obtain the FEB. there are possible future economic benefits.
 Either
obligations There is therefore no guarantee at this stage Capitalize Expense Out
individually or that the future economic benefits are:
together with 1. Expected (thus the definition is not met);
N1: Conditions for capitalization:
other contract or
4. Regardless of whether  The technical feasibility of completing the asset;
the entity intends to do ❷ 2. Probable (thus the recognition criteria
 The intention to complete the asset and to either use or
are not met).
so or not. ❺ sell it;
 The ability to use or sell the asset;
 How the asset will generate future economic benefits,
Internally Generated Items Concept of in-process Research and through, for instance, demonstrating that there is a
market to sell to, or if the asset is to be used internally,
Development Purchased then its usefulness;
 The adequate availability of necessary resources
Internally generated Goodwill Internally generated items other than Goodwill (technical, financial or otherwise) to complete the
Initially Subsequently development and to sell or use the asset; and
 the ability to reliably measure the cost of the
development of the asset
IA Asset Definition & criteria= Not Met IA Definition and IA Definition and
Measured at fair value (Includes
criteria = met criteria = not met both research and Costs that relate to Costs that relate to
development) research must be
Expense Out expensed
development:

Internally generated Expense

Just For Ratafication:
intangible asset Expense out if 6 Capitalize if 6
conditions are not conditions are met. ❻
If following internally generated met
items appear in paper are never ❼ Amortization Amount to be amortized is = Cost (or fair value) of the asset – Residual value
capitalized (always ignore): The reason that the internal generation of these
items results in them being expensed is because
the nature of the costs incurred in the process Ceases
 Goodwill of creating them are very similar to the costs Period
that are related to simply operating a business. Begins At earlier of: Shorter of:
 Brands In other words, it is impossible to separate the
The residual value should always be zero unless:
one from the other and reliably measure the When an asset becomes
 Mastheads costs to be capitalized. available for use – same
i. De-recognition of the asset i. Economic Life
1. third party has committed to purchasing the asset at the end of its useful life
ii. Re-classification of the asset to ii. Legal Life (unless legal
 Publishing Titles On the other hand, had they been purchased, as PPE (IAS 16). the classification of ‘non- rights are renewable & 2. there is an active market (as defined in IRFS 13) for that asset and
there would be a reliable measure – the purchase
 Customer List price! current asset held for sale’. evidence suggests renewal  it is possible to measure the residual value using such market and
will occur at insignificant  it is probable that the market will still exist at the end of the asset’s useful life
 Other similar items cost.