04/10/2023 IAS 38 Intangible Assets Part One 1

IAS 38INTANGIBLE ASSETS (Part one)Definition & Recognition

04/10/2023 IAS 38 Intangible Assets Part One 2

ObjectiveSpecific criteria for recognition of

intangible assetsMeasure carrying amount of

intangible assetsSpecific disclosures about

intangible assets

04/10/2023 IAS 38 Intangible Assets Part One 3

ScopeIntangible assets except

◦Within the scope of another standard◦Financial assets IAS 39◦Exploration and evaluation assets of

mineral resources IFRS 6◦Expenditure on the development and

extraction of minerals, oil, natural gas and similar non-regenerative resources

04/10/2023 IAS 38 Intangible Assets Part One 4

Examples of intangible assets excluded from IAS 38 Intangibles held for sale in the ordinary course of

business ◦ Inventories IAS 2 ◦ Construction contracts IAS 11

Deferred tax assets IAS12 Leases IAS 17 Employee benefits IAS19 Financial assets IAS 39, IAS 27, IAS 28, IAS 31 Goodwill IFRS 3 Insurance contracts IFRS 4 Intangible assets in discontinued operations IFRS 5 Activities or transactions are so specialised that

another accounting treatment is appropriate (para 6)

04/10/2023 IAS 38 Intangible Assets Part One 5

SoftwareCan be IAS 16 property plant and

equipment or intangible assetElements of tangible (disc) and

intangible (software) assetsWhen software is not an integral

part of the related hardware, treat as intangible asset.◦Computer controlled machine◦Operating system of PC

04/10/2023 IAS 38 Intangible Assets Part One 6

Examples of intangibles included in IAS 38Advertising expenditureStart-up costsResearch and developmentIntangible assets under finance

leaseRights under licensing

agreements (films, plays, manuscripts, patents, copyrights)

04/10/2023 IAS 38 Intangible Assets Part One 7

Definitions

Active

market

•Items traded are homogeneous

•Willing buyers and sellers at any time

•Prices available to public

Agreement

date

•Private business combination: substantive agreement reached

•Publicly listed: announcement to public

•Hostile takeover: offer accepted by sufficient number of owners

Amortisation

•Systematic allocation of depreciable amount over useful life

04/10/2023 IAS 38 Intangible Assets Part One 8

Definitions

Asset

•Controlled as a result of past event

•Future economic benefits expected

Carrying Amoun

t

•Balance sheet amount

•Less accumulated amortisation and impairment

Cost

•Cash paid

•Fair value of consideration given

•Amount attributed at acquisition by another standard (IFRS 2)

04/10/2023 IAS 38 Intangible Assets Part One 9

Definitions

Depreciable

amount

•Cost less residual value

Development

•Application of research/knowledge

•Development before start of production

Entity-

specific

value

•Present value of the cash flows

•from continuing use of an asset

•disposal

•Settling of associated liability

04/10/2023 IAS 38 Intangible Assets Part One 10

Definitions

Fair valu

e

•Amount of exchange between knowledgeable, willing parties in an arm’s length transaction

Impairment

loss

•Carrying amount > recoverable amount

Intangible asset

•Identifiable non-monetary asset without physical substance

04/10/2023 IAS 38 Intangible Assets Part One 11

Definitions

Monetar

y asset

•Money held

•Assets to be received in fixed or determinable amounts of money

Researc

h

•Original and planned investigation

•Gain new scientific or technical knowledge

Residual valu

e

•Estimated amount from current disposal of asset

•Less cost of disposal

•At age and condition at end of useful life

04/10/2023 IAS 38 Intangible Assets Part One 12

Definitions

Useful life

•Period over which an asset is expected to be available for use by an entity

•Number of production or similar units expected to be obtained from the asset by an entity

04/10/2023 IAS 38 Intangible Assets Part One 13

Intangible assets

Computer software

patents

copyrightsMortgage servicing

rights

Customer lists

Motion picture films

Fishing licences

Import quotas

franchises Customer lists

Market share

Marketing rights

04/10/2023 IAS 38 Intangible Assets Part One 14

Recognition of intangible asset

Must meet definition◦Identifiable◦Control over a resource◦Future economic benefits

If it does not meet definition◦Recognise expenditure as incurred

If acquired in a business combination◦Forms part of goodwill at acquisition

date

04/10/2023 IAS 38 Intangible Assets Part One 15

Identifiable Intangible AssetSeparable

◦From entity◦Can be sold, transferred, licensed,

exchanged, rented◦Individually or related contract, asset

& liabilityArises from contractual or legal

rights◦The rights do not have to be

separableCONTINUED IN PART 2…