IFRS at a Glance - IAS 38: Intangible Assets - BDO International

As at 1 January 2015Also refer:SIC-32 Intangible Assets – Web Site CostsIAS 38 Intangible AssetsRECOGNITION AND MEASUREMENTEffective DatePeriods beginning on or after 31 March 2004SEPARATEACQUISITIONACQUIRED IN BUSINESSCOMBINATIONINTERNALLY GENERATEDEXCHANGE OFASSETSINTERNALLYGENERATED GOODWILLGOVERNMENT GRANT1. Probable –expected futureeconomicbenefits will flowto the entity; and2. Cost can be2. Probable – always met if fairvalue (FV) can be determined;FV reflects expectation offuture economic benefits.3. Cost – FV at acquisition date.Specific reliably quantitative disclosure Acquirer requirements:recognises itmeasured.separately from goodwill Irrespective of whether theRecognition at cost.acquiree had recognised itbefore acquisition.Research phase – expense costs as incurred.Development phase – Capitalise if all criteriaare met: Technical feasibility of completion ofintangible asset Intention to complete Ability to use or sell the intangible asset Adequate technical, financial and otherresources to complete Probable future economic benefits Expenditure measured reliably. Measure acquired assetat its fair value If not possible, at bookvalue of asset given up.Internally generated goodwill isnever recognised as it is not anidentifiable resource that canbe measured reliably.Examples include: Internally generated brands Customer lists.Initially recognised at either: Fair value Nominal value plus directexpenses to prepare for use.Examples include: License to operate nationallottery Radio station.DEFINITIONSUBSEQUENT ACCOUNTINGIntangible assets - identifiable, non-monetary assets, withoutphysical substance.Assets - resources, controlled from past events and with futureeconomic benefits expected.Identifiable if either: Capable of being separated and sold, licensed, rented,transferred, exchanged or rented separately Arise from contractual or other legal rights.Scope exclusions: financial and intangible assets covered by otherIFRSs (IAS 2, IAS 12, IAS 17, IAS 19, IAS 32, IFRS 4, IFRS 5).Finite useful life – Choose either amortised cost or revaluation model:Cost model Determine useful life Residual value – assumed zero unlessactive market exists or acommitment by third party topurchase the intangible asset exists Amortisation method Review above annually Amortisation begins when availablefor use.Amendments to IAS 38 (Effective1 January 2016) Rebuttable presumption thatrevenue based amortisation isinappropriate Amortisation method reflects thepattern in which future economicbenefits are expected to beconsumed.Revaluation model Fair value at revaluation date Fair value determined by referring toactive market If no active market, use cost model Revaluation done regularly The net carrying amount of the asset isadjusted to the revalued amount and The gross carrying amount isadjusted in a manner consistentwith the net carrying amount.Accumulated amortisation isadjusted to equal the differencebetween the gross and net carryingamount; or Accumulated amortisation iseliminated against the grosscarrying amount. Credit to revaluation surplus net ofDeferred Tax Transfer to or from retained earningson realisation.Indefinite useful lives No foreseeable limit to future expected economic benefits Not amortised Test for impairment annually or when an indication exists Review annually if events and circumstances still supportindefinite useful life If no longer indefinite change to finite useful life.OTHERPast expenses cannot be capitalised in a later period.