IAS 38: INTANGIBLE
ASSETS
SUMMARY
WHAT? (IAS 38:8)
Identifiable (38:11-12)
o Separable
o Arises from contractual/legal right
o Eg: Goodwill; Reputation
Non-Monetary (38:13-17)
o Not money/cash or right to receive money; or an asset that is going to be
received in a fixed or determinable amount of cash
Asset (CF4)
Without physical substance
o What if asset has tangible & intangible elements? (.4)
If intangible element more significant; then whole asset is intangible
(e.g. software on CD)
If intangible (e.g. operating system) is an integral part of tangible
(e.g. computer): then whole asset is tangible
Intangible: more about the ideas contained within
Scope Exclusions (38:2)
WHEN? (IAS 38:21)
IFRS for SMEs have additional criteria; only recognise IA that is externally acquired
When recognition criteria are met
Internally Generated Intangible Assets:
o Research Phase:
Not begun developing any product; just gathering info
Uncertainty around probability of inflow of future economic
benefits
Therefore always expense (IAS 38:54)
o Development Phase:
If requirements of IAS 38:57 are ALL met, can capitalise the
development expenditure
HOW MUCH?
IAS 38:24 – recognise at cost
IAS 38:27a – purchase price
IAS 38:27b – directly attributable costs to prepare
SUBSEQUENT MEASUREMENT
IAS 38:74
, IAS 38: INTANGIBLE
ASSETS
Amortisation and impairment testing
Carrying Value = Cost – Accumulated Amortization – Accumulated Impairment
Amortisation (IAS38:8): systematic of IA's depreciable amount over useful life as per :97
o Useful Life: must be assessed if finite or indefinite based on all relevant
factors (IAS38:88) but cannot exceed period of contractual/legal
rights (IAS38:94) stipulated unless renewal option available w/o significant
costs
o (IAS 38:100) Residual Value: assumed to be zero unless
3rd party commits to purchase at end of UL OR
Active market exists which can be referenced to determine RV
and it is probable that it will still exist at end of UL
o Revaluation Model: CV = Cost less subsequent
accumulated amoritisation and impairment (IAS 38:75) however this model
is only allowed if there is an active market that you can use to determine the
FV and active markets are rare
DERECGONITION
When the intangible asset is sold
If no expected future economic benefits are expected to flow from the use of the asset
Profit/Loss with
derecognition = Net DISCLOSURE (IAS 38:118)
derecognition proceeds - For each class of IA:
o Useful lives
o Amoritisation methods
o Recon of OB to CB with split of gross carrying amount and
accumulated amoritisation
o Must distinguish between IA with indefinite UL vs finite
IAS 38 vs IAS 16
What are common principles What is different about IAS 38?
between IAS 16 (PPE) and IAS 38?
ASSETS
SUMMARY
WHAT? (IAS 38:8)
Identifiable (38:11-12)
o Separable
o Arises from contractual/legal right
o Eg: Goodwill; Reputation
Non-Monetary (38:13-17)
o Not money/cash or right to receive money; or an asset that is going to be
received in a fixed or determinable amount of cash
Asset (CF4)
Without physical substance
o What if asset has tangible & intangible elements? (.4)
If intangible element more significant; then whole asset is intangible
(e.g. software on CD)
If intangible (e.g. operating system) is an integral part of tangible
(e.g. computer): then whole asset is tangible
Intangible: more about the ideas contained within
Scope Exclusions (38:2)
WHEN? (IAS 38:21)
IFRS for SMEs have additional criteria; only recognise IA that is externally acquired
When recognition criteria are met
Internally Generated Intangible Assets:
o Research Phase:
Not begun developing any product; just gathering info
Uncertainty around probability of inflow of future economic
benefits
Therefore always expense (IAS 38:54)
o Development Phase:
If requirements of IAS 38:57 are ALL met, can capitalise the
development expenditure
HOW MUCH?
IAS 38:24 – recognise at cost
IAS 38:27a – purchase price
IAS 38:27b – directly attributable costs to prepare
SUBSEQUENT MEASUREMENT
IAS 38:74
, IAS 38: INTANGIBLE
ASSETS
Amortisation and impairment testing
Carrying Value = Cost – Accumulated Amortization – Accumulated Impairment
Amortisation (IAS38:8): systematic of IA's depreciable amount over useful life as per :97
o Useful Life: must be assessed if finite or indefinite based on all relevant
factors (IAS38:88) but cannot exceed period of contractual/legal
rights (IAS38:94) stipulated unless renewal option available w/o significant
costs
o (IAS 38:100) Residual Value: assumed to be zero unless
3rd party commits to purchase at end of UL OR
Active market exists which can be referenced to determine RV
and it is probable that it will still exist at end of UL
o Revaluation Model: CV = Cost less subsequent
accumulated amoritisation and impairment (IAS 38:75) however this model
is only allowed if there is an active market that you can use to determine the
FV and active markets are rare
DERECGONITION
When the intangible asset is sold
If no expected future economic benefits are expected to flow from the use of the asset
Profit/Loss with
derecognition = Net DISCLOSURE (IAS 38:118)
derecognition proceeds - For each class of IA:
o Useful lives
o Amoritisation methods
o Recon of OB to CB with split of gross carrying amount and
accumulated amoritisation
o Must distinguish between IA with indefinite UL vs finite
IAS 38 vs IAS 16
What are common principles What is different about IAS 38?
between IAS 16 (PPE) and IAS 38?
