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IFRS – IAS 38 Intangible Assets

IFRS IAS 38 Intangible Assets

IFRS IAS 38 Intangible Assets-The objective of this Standard is to prescribe the accounting treatment for intangible assets that are not dealt with specifically in another Standard. This Standard requires an entity to recognise an intangible asset if, and only if, specified criteria are met.

The Standard also specifies how to measure the carrying amount of intangible assets and requires specified disclosures about intangible assets. An intangible asset is an identifiable non-monetary asset without physical substance.

IFRS IAS 38 Intangible Assets- Recognition and measurement: The recognition of an item as an intangible asset requires an entity to demonstrate that the item meets:

(a) the definition of an intangible asset; and

(b) the recognition criteria. This requirement applies to costs incurred initially to acquire or internally generate an intangible asset and those incurred subsequently to add to, replace part of, or service it.

IFRS IAS 38 Intangible Assets: An asset is identifiable if it either:

  1. Is separable, is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so; or
  2. Arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.
  3. It is probable that the expected future economic benefits that are attributable to the asset will flow to the entity.
  4. The cost of the asset can be measured reliably.

IFRS IAS 38 Intangible Assets

An intangible asset shall be measured initially at cost. The cost of a separately acquired intangible asset comprises:

(a) its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates; and

(b) any directly attributable cost of preparing the asset for its intended use.

IFRS IAS 38 Intangible Assets

IFRS IAS 38 Intangible Assets:Internally generated intangible assets Internally generated goodwill shall not be recognised as an asset. No intangible asset arising from research shall be recognised. Expenditure on research shall be recognised as an expense when it is incurred. An intangible asset arising from development shall be recognised if, and only if, an entity can demonstrate all of the following:

  1. The technical feasibility of completing the intangible asset so that it will be available for use or sale.
  2.  Its intention to complete the intangible asset and use or sell it.
  3. Its ability to use or sell the intangible asset.
  4. How the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.
  5. The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.
  6. Its ability to measure reliably the expenditure attributable to the intangible asset during its development.

IFRS IAS 38 Intangible AssetsMeasurement after recognition An entity shall choose either the cost model or the revaluation model as its accounting policy. If an intangible asset is accounted for using the revaluation model, all the other assets in its class shall also be accounted for using the same model, unless there is no active market for those assets.

Cost model: After initial recognition, an intangible asset shall be carried at its cost less any accumulated amortisation and any accumulated impairment losses.

Revaluation model: After initial recognition, an intangible asset shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated amortisation and any subsequent accumulated impairment losses.

IFRS IAS 38 Intangible AssetsFor the purpose of revaluations under this Standard, fair value shall be measured by reference to an active market. Revaluations shall be made with such regularity that at the end of the reporting period the carrying amount of the asset does not differ materially from its fair value. An active market is a market in which all the following conditions exist:

(a) the items traded in the market are homogeneous.

(b) willing buyers and sellers can normally be found at any time.

(c) prices are available to the public.

IFRS IAS 38 Intangible Assets-Useful life is:

  1. The period over which an asset is expected to be available for use by an entity.
  2. The number of production or similar units expected to be obtained from the asset by an entity.

IFRS IAS 38 Intangible Assets: Intangible assets

Intangible assets with finite useful lives The depreciate amount of an intangible asset with a finite useful life shall be allocated on a systematic basis over its useful life. Decipherable amount is the cost of an asset, or other amount substituted for cost, less its residual value.

Amortisation shall begin when the asset is available for use, ie when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Amortisation shall cease at the earlier of the date that the asset is classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations and the date that the asset is de-recognised.

IFRS IAS 38 Intangible Assets:  The amortisation method used shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. If that pattern cannot be determined reliably, the straight-line method shall be used. The amortisation charge for each period shall be recognised in profit or loss unless this or another Standard permits or requires it to be included in the carrying amount of another asset. The residual value of an intangible asset is the estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.

IFRS IAS 38 Intangible Assets:  The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless:

  1. There is a commitment by a third party to purchase the asset at the end of its useful life; or
  2. There is an active market for the asset and:
    1. Residual value can be determined by reference to that market;
    2. It is probable that such a market will exist at the end of the asset’s useful life.


IFRS - IAS 38 Intangible Assets

IFRS IAS 38 Intangible Assets

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