IAS 38
Intangible Assets
Nature and Definition
o Intangible Assets: an identifiable, non-monetary asset without physical substances
▪ Controlled by entity as a result of past events
▪ From which future economic benefits are expected to flow
o Identifiability: used to distinguish from goodwill
▪ Asset is separable from entity or
▪ Asset arises from contractual obligation
o Non-monetary: not cash or assets receivable in fixed/determinable amounts of cash
o
Recognition
o All costs incurred for intangible assets must be recognized as expenses when incurred
unless costs form part of costs of intangible assets that meet recognition criteria &
capitalized
o Criteria:
▪ Probable that future economic benefits specifically attributable to the asset will
flow to the entity
▪ Costs attributable to asset can be measured reliably
(costs = purchase price + import duty + legal fees + testing cost + taxes etc…)
o Goodwill: internally generated goodwill is not recognized as an intangible asset because
it doesn’t meet the definition or recognition criteria
Internally Generated Asset
o Research Phase: original & planned investigation undertaken with the prospect of
gaining new scientific/technical knowledge
▪ Research costs are always expensed
o Development Phase: application of research and findings/other knowledge through
development of a plan/design aimed at production of new/improved
materials/devices/systems etc…
▪ Additional recognition criteria
Probable future economic benefits
Intention to complete asset
Resources are available to complete asser
Ability to use the asset (or sell)
Technical feasibility of asset
Expenditure related to asset can be reliably measured
If can’t distinguish between research & development phases, then all
expenditure can be considered research costs & written off as incurred
Intangible Assets
Nature and Definition
o Intangible Assets: an identifiable, non-monetary asset without physical substances
▪ Controlled by entity as a result of past events
▪ From which future economic benefits are expected to flow
o Identifiability: used to distinguish from goodwill
▪ Asset is separable from entity or
▪ Asset arises from contractual obligation
o Non-monetary: not cash or assets receivable in fixed/determinable amounts of cash
o
Recognition
o All costs incurred for intangible assets must be recognized as expenses when incurred
unless costs form part of costs of intangible assets that meet recognition criteria &
capitalized
o Criteria:
▪ Probable that future economic benefits specifically attributable to the asset will
flow to the entity
▪ Costs attributable to asset can be measured reliably
(costs = purchase price + import duty + legal fees + testing cost + taxes etc…)
o Goodwill: internally generated goodwill is not recognized as an intangible asset because
it doesn’t meet the definition or recognition criteria
Internally Generated Asset
o Research Phase: original & planned investigation undertaken with the prospect of
gaining new scientific/technical knowledge
▪ Research costs are always expensed
o Development Phase: application of research and findings/other knowledge through
development of a plan/design aimed at production of new/improved
materials/devices/systems etc…
▪ Additional recognition criteria
Probable future economic benefits
Intention to complete asset
Resources are available to complete asser
Ability to use the asset (or sell)
Technical feasibility of asset
Expenditure related to asset can be reliably measured
If can’t distinguish between research & development phases, then all
expenditure can be considered research costs & written off as incurred
