INTANGIBLE ASSETS HANDOUT 1:

INTANGIBLE ASSET DEFINITION AND INITIAL MEASUREMENT: PAS 38

An intangible is an “identifiable non-monetary asset without physical substance.”

1. ________________ - "an asset is identifiable if it either:
IDENTIFIABILITY

a. is separable; or
b. arises from contractual or other legal rights

2. ________________ - means the entity has the ability to benefit from the intangible asset or
CONTROL

prevent others from benefitting from it.

Control of an intangible asset normally arises from legal rights that are enforceable in a court of law.
However legal enforceability of a right is not a necessary condition for control because an entity may
be able to control an assets future economic benefits in some other way.

3. ________________- the future economic benefits from an intangible asset may include revenue
from the sale of products or services, cost savings (e.g., reduction in production costs rather than
increase in revenues), or other benefits resulting from the entity's use of the asset.

Assets with both intangible and tangible elements

Some assets may have both intangible and tangible elements. In determining whether such an asset
is to be accounted for as a PPE or an intangible asset, the entity uses judgment to assess which
element is more significant.
If the intangible component is an integral part of the asset as a whole, the intangible element is
treated as PPE. Otherwise, it is treated as a separate intangible asset.

Initial Measurement
Intangible assets are initially measured at cost.
The measurement of cost depends on how the intangible asset is acquired:
Separate Acquisition Acquisition as part of business combination
a. Its ______________, including import duties The cost of an intangible asset acquired in a
PURCHASE COST

and non-refundable purchase taxes, after business combination is its ________________ at

FAIR VALUE

deducting trade discounts and rebates; and the acquisition date.

b. Any ________________________, such as:
ATTRIBUTABLE COSTS

• Costs of employee benefits arising directly

from bringing the asset to its working
condition
• Professional fees arising directly from
bringing the asset to its working condition
• Costs of testing whether the asset is
functioning properly

Acquisition by way of government grant Internally generated intangible assets

May be initially measured either:
a. At ________________; or
FAIR VALUE
b. Alternatively, at minimal amount plus
direct costs incurred in preparing the
asset for its intended use
NOMINAL VALUE + EXPENSES INCURRED
To determine whether an internally generated
intangible asset meets the recognition criteria, its
generation is classified into:
a. ________________; and
b. ________________.

INTANGIBLE ASSETS HO#1 1