Board paper cover sheet - NHS Ayrshire and Arran.

NHS Board Meeting23 June 2010 Paper 5Vehicles and Soft Furnishings 5Office, Short Life Medical and Other Equipment 57. Intangible Assets7.1 RecognitionIntangible assets are non-monetary assets without physical substance which arecapable of being sold separately from the rest of the Board’s business or which arisefrom contractual or other legal rights. They are recognised only where it is probablethat future economic benefits will flow to, or service potential be provided to, theBoard and where the cost of the asset can be measured reliably.Intangible assets that meet the recognition criteria are capitalised when they arecapable of being used in a Board’s activities for more than one year and they have acost of at least £5,000. The main classes of intangible assets recognised are:Carbon Emissions (Intangible Assets):A cap and trade scheme gives rise to an asset for allowances held, a governmentgrant and a liability for the obligation to deliver allowances equal to emissions thathave been made.Intangible Assets, such as EU Greenhouse Gas Emission Allowances intended to beheld for use on a continuing basis whether allocated by government or purchased areclassified as intangible assets. Allowances that are issued for less than their fairvalue are measured initially at their fair value.When allowances are issued for less than their fair value, the difference between theamount paid and fair value is revaluation and charged to the government grantreserve. The government grant reserve is charged with the same proportion of theamount of the revaluation, which the amount of the grant bears to the acquisition costof the asset.A provision is recognised for the obligation to deliver allowances equal to emissionsthat have been made. It is measured at the best estimate of the expenditure requiredto settle the present obligation at the balance sheet date. This will usually be thepresent market price of the number of allowances required to cover emissions madeup to the balance sheet date.7.2 MeasurementValuation:Intangible assets are recognised initially at cost, comprising all directly attributablecosts needed to create, produce and prepare the asset to the point that it is capableof operating in the manner intended by management.Subsequently intangible assets are measured at fair value. Where an active(homogeneous) market exists, intangible assets are carried at fair value. Where noactive market exists, the intangible asset is revalued, using indices or some suitablemodel, to the lower of depreciated replacement cost or value in use where the assetis income generating. Where there is no value in use, the intangible asset is valuedusing depreciated replacement cost. These measures are a proxy for fair value.Page 48 of 136