A NEW WAY OF AUDITING – AUDIT IN KNOWLEADGE BASED ...

Annals of the University “Constantin Brâncuşi”of Tg-Jiu, No. 1/2008, Volume 3,
ISSN: 1842-4856
entity;
� the cost of the asset can be measured reliably.
The second criterion – reliability measuring cost of the items – is usually satisfied
because the acquisition cost is known and the costs directly attributable to the purchased
assets is certainly identified.
All other expenses related to the following categories are expensed. They include:
� internally generated brands, mastheads, publishing titles, customer lists, and so on;
� start-up costs;
� training costs;
� advertising and promotion;
� relocation and reorganization expenses;
� redundancy and other termination costs.
In the case of a business combination, expenditure on an intangible item that does not
meet both the definition and recognition criteria for an intangible asset should form part of the
amount attributed to goodwill.
On initial recognition, an intangible asset is measured at cost, whether it is acquired
externally or generated internally. Subsequent to initial recognition, an entity should choose
either the cost model or the revaluation model as its accountig policy for intangible assets and
should apply that policy to an entire class of intangible assets.
The cost model presume that the carrying amount of an intangible asset is its cost less
acumulated depreciation and impairment losses.
The revaluation model presume that the carrying amount of an intangible asset is its
fair value less subsequent accumulated depreciation and impairment losses. If an item of
intangible asset is revalued then the entire class of intangible asset to which that asset belongs
should be revalued. Assets should be regularly revalued so that carrying value does not differ
materially from fair value. Increases determined by revaluation should be credited directly to
equity under the heading of revaluation surplus. A reversal of a previous loss for the same
asset is taken to the income statement. Decreases should be recognized (debited) in profit or
loss. A reversal of a profit previously taken to equity can be debited to equity.
Both of the models presume that assets classified as held for sale are shown at the
lower of fair value less costs to sell and carrying value.
For any internal project to create an intangible asset, the research phase and
development phase should be distinguished from one another. Research expenditure is treated
as an expense. Development expenditure is recognized as an intangible asset if all of the
following can be demonstrated:
� the tehnical feasibillity of completing the intangible asset so that it will be
available for use or sale;
� the availability of adequate tehnical, and other resources to complete the
development and to use or sell de intangible asset;
� the intention to complete the intangible asset and use or sell it;
� the ability to use or sell the intangible asset;
� how the intangible asset will generate probable future economic benefits;
� the ability to measure the expenditure.
An entity should assess wether the useful life of an intangible asset is finite or infinite
and, if finite, the length of its life, or number of production or similar units constituting its
useful life. Amortization and impairment principles apply as follows:
� an intangible asset with finite useful life is amortized on a systematic basis over
the best estimate of its useful life;
� an intangible asset with an infinite useful life should be tested for impairment
annualy, but not amortized.
46