Accounting Standards 1-29 - Seth & Associates

supportable assumptions that represent best estimate of the set of economic conditions that will
exist over the useful life of the asset.
22. An enterprise uses judgement to assess the degree of certainty attached to the flow of future economic
benefits that are attributable to the use of the asset on the basis of the evidence available at the time of
initial recognition, giving greater weight to external evidence.
23. An intangible asset should be measured initially at cost.
Separate Acquisition
24. If an intangible asset is acquired separately, the cost of the intangible asset can usually be measured
reliably. This is particularly so when the purchase consideration is in the form of cash or other monetary
assets.
25. The cost of an intangible asset comprises its purchase price, including any import duties and other taxes
(other than those subsequently recoverable by the enterprise from the taxing authorities), and any directly
attributable expenditure on making the asset ready for its intended use. Directly attributable expenditure
includes, for example, professional fees for legal services. Any trade discounts and rebates are deducted
in arriving at the cost.
26. If an intangible asset is acquired in exchange for shares or other securities of the reporting enterprise, the
asset is recorded at its fair value, or the fair value of the securities issued, whichever is more clearly
evident.
Acquisition as Part of an Amalgamation
27. An intangible asset acquired in an amalgamation in the nature of purchase is accounted for in accordance
with Accounting Standard (AS) 14, Accounting for Amalgamations. Where in preparing the financial
statements of the transferee company, the consideration is allocated to individual identifiable assets and
liabilities on the basis of their fair values at the date of amalgamation, paragraphs 28 to 32 of this
Statement need to be considered.
28. Judgement is required to determine whether the cost (i.e. fair value) of an intangible asset acquired in an
amalgamation can be measured with sufficient reliability for the purpose of separate recognition. Quoted
market prices in an active market provide the most reliable measurement of fair value. The appropriate
market price is usually the current bid price. If current bid prices are unavailable, the price of the most
recent similar transaction may provide a basis from which to estimate fair value, provided that there has
not been a significant change in economic circumstances between the transaction date and the date at
which the asset's fair value is estimated.
29. If no active market exists for an asset, its cost reflects the amount that the enterprise would have paid, at
the date of the acquisition, for the asset in an arm's length transaction between knowledgeable and willing
parties, based on the best information available. In determining this amount, an enterprise considers the
outcome of recent transactions for similar assets.
30. Certain enterprises that are regularly involved in the purchase and sale of unique intangible assets have
developed techniques for estimating their fair values indirectly. These techniques may be used for initial
measurement of an intangible asset acquired in an amalgamation in the nature of purchase if their
objective is to estimate fair value as defined in this Statement and if they reflect current transactions and
practices in the industry to which the asset belongs. These techniques include, where appropriate,
applying multiples reflecting current market transactions to certain indicators driving the profitability of the
asset (such as revenue, market shares, operating profit, etc.) or discounting estimated future net cash
flows from the asset.
31. In accordance with this Statement:
a. a transferee recognises an intangible asset that meets the recognition criteria in paragraphs 20
and 21, even if that intangible asset had not been recognised in the financial statements of the
transferor ; and