ACBP6221 LU6
ACBP6221 LU6 – IAS38 Intangible
assets
6.1 Introduction
Asset = present economic resource controlled by the entity as a result from past events.
Asset can be:
- Tangible
o PPE
- Intangible
o Trademarks, patents, financial assets
6.2 Objectives and Scope
Objectives of IAS38:
- est the recognition criteria for an intangible asset
- specify how an intangible asset should be measured
- specify the disclosure requirements for intangible assets
Scope:
IAS38 applied to all intangible assets except:
- intangible assets within the scope of another standard
- Financial assets (IAS 32)
- Recognition and measurement of exploration and evaluation assets (IFRS 6)
- Expenditure on the development and extraction of minerals, oil natural gas and
similar non regenerative resources
- intangible assets held by an entity for sale in the ordinary course of business
- Deferred tax assets
- Leases of intangible assets
- Assets arising from employee benefits (IAS 19)
- Goodwill acquired in a business combination
- Insurance contract
- Noncurrent intangible assets held for sale
- Assets arising from contracts with customers
There may be situations where intangible assets are in or on a physical item – OS on a
laptop.
1
, ACBP6221 LU6
Example 6.1
Computer software can be purchased as an integral part of the related hardware (e.g. an
operating system already installed on a laptop computer) or as a separate component of the
related hardware (e.g. an off-the-shelf system that comes on a CD and can be installed onto
a computer).
Essentially, where the software is an integral part of the related hardware, the software s
treated as an item of PPE (the operating system on the laptop) as the hardware element is
more significant. In contrast, where the software is not an integral part of the related
hardware, the software is treated as an intangible asset (the ERP system).
6.3 Key terms
Amortisation = Systematic allocation of the depreciable amount of an intangible as set over
its useful life.
Carrying amount = Amount at which an asset is recognised in the SOFP after deducting
any accumulated amortisation and accumulated impairment losses.
Depreciable amount = Cost of an asset less its residual value.
Development = Application of research findings or other knowledge to plan or design for the
production of new or substantially improved materials, devices, products, processes,
systems or services before the start of commercial production or use.
Monetary assets = Money held and assets to be received in fixed or determinable amounts
of money.
Research = Original and planned investigation undertaken with the prospect of gaining new
scientific and technical knowledge and understanding.
6.3.1 Intangible Assets: Key features
An IA is an identifiable non-monetary asset without physical substance
- computer software - customer lists
- patents - fishing licences
- copyrights - import quotas
- motion picture films - franchises
Any expenditures incurred on getting or generating the item should be expensed in P/L as
incurred – only exception is an item acquired in a business combination which is recognised
as part of the goodwill at the acquisition date.
Identifiability
An asset is identifiable if it is either:
- separable
o the item can be separated or divided from the entity and sold, transferred,
licensed, rented or exchanged either individually or together with a related
contract
- arises from contractual or other legal rights
o regardless of whether the rights are transferrable or separable from the entity
2
ACBP6221 LU6 – IAS38 Intangible
assets
6.1 Introduction
Asset = present economic resource controlled by the entity as a result from past events.
Asset can be:
- Tangible
o PPE
- Intangible
o Trademarks, patents, financial assets
6.2 Objectives and Scope
Objectives of IAS38:
- est the recognition criteria for an intangible asset
- specify how an intangible asset should be measured
- specify the disclosure requirements for intangible assets
Scope:
IAS38 applied to all intangible assets except:
- intangible assets within the scope of another standard
- Financial assets (IAS 32)
- Recognition and measurement of exploration and evaluation assets (IFRS 6)
- Expenditure on the development and extraction of minerals, oil natural gas and
similar non regenerative resources
- intangible assets held by an entity for sale in the ordinary course of business
- Deferred tax assets
- Leases of intangible assets
- Assets arising from employee benefits (IAS 19)
- Goodwill acquired in a business combination
- Insurance contract
- Noncurrent intangible assets held for sale
- Assets arising from contracts with customers
There may be situations where intangible assets are in or on a physical item – OS on a
laptop.
1
, ACBP6221 LU6
Example 6.1
Computer software can be purchased as an integral part of the related hardware (e.g. an
operating system already installed on a laptop computer) or as a separate component of the
related hardware (e.g. an off-the-shelf system that comes on a CD and can be installed onto
a computer).
Essentially, where the software is an integral part of the related hardware, the software s
treated as an item of PPE (the operating system on the laptop) as the hardware element is
more significant. In contrast, where the software is not an integral part of the related
hardware, the software is treated as an intangible asset (the ERP system).
6.3 Key terms
Amortisation = Systematic allocation of the depreciable amount of an intangible as set over
its useful life.
Carrying amount = Amount at which an asset is recognised in the SOFP after deducting
any accumulated amortisation and accumulated impairment losses.
Depreciable amount = Cost of an asset less its residual value.
Development = Application of research findings or other knowledge to plan or design for the
production of new or substantially improved materials, devices, products, processes,
systems or services before the start of commercial production or use.
Monetary assets = Money held and assets to be received in fixed or determinable amounts
of money.
Research = Original and planned investigation undertaken with the prospect of gaining new
scientific and technical knowledge and understanding.
6.3.1 Intangible Assets: Key features
An IA is an identifiable non-monetary asset without physical substance
- computer software - customer lists
- patents - fishing licences
- copyrights - import quotas
- motion picture films - franchises
Any expenditures incurred on getting or generating the item should be expensed in P/L as
incurred – only exception is an item acquired in a business combination which is recognised
as part of the goodwill at the acquisition date.
Identifiability
An asset is identifiable if it is either:
- separable
o the item can be separated or divided from the entity and sold, transferred,
licensed, rented or exchanged either individually or together with a related
contract
- arises from contractual or other legal rights
o regardless of whether the rights are transferrable or separable from the entity
2
