Chapter 13 - Intangible Assets

An intangible asset shall be derecognized at one of this occurrences

- On disposal, or - when no future economic benefits are expected from its use or disposal.

An asset is separable if the entity can (3):

- Rent, sell, exchange or distribute the specific future economic benefits attributable to the asset without also disposing of other assets or future economic benefits that flow from them. - If an intangible asset is acquired together with a set of other assets, it may be separately identifiable by virtue of separate legal rights attaching to it. - An internally generated intangible asset may also result from an internal project that gives rise to legal rights for the entity.

The resource itself is not recognizable as an asset unless the criterion of control. Control is exercised by an entity over an asset if the entity:

• has the power to obtain the future economic benefits flowing from the underlying resource. • can also restrict the access of others to such benefits.

An asset is defined as:

A resource [that is controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

An intangible asset is defined as

An identifiable non-monetary asset without physical substance'. This excludes goodwill, which is by definition non-identifiable.

Describe reliable measurability

An intangible asset (that has met the other recognition criteria) should be recognized only if its cost can be measured reliably and that it should be measured initially at that cost.

How can the initial measurement of an intangible asset be done? (2)

At cost. At fair value.

Three criteria need to be satisfied before an item should be recognized as an intangible asset under IAS 38:

Identifiability, control and reliable measurability.

Is an intangible asset with indefinite useful life amortized (depreciated) and tested for impairment?

If the value of an intangible asset with an indefinite useful life decreases showed by an impairment test, an impairment needs to be recorded. However, an intangible asset with an indefinite useful life shall not be depreciated.

Why is identifiability necessary?

Is necessary in order to distinguish an intangible asset from goodwill.

Are internally generated intangible assets recognized as an asset?

Most internally generated intangible assets shall not be recognised as an asset. •Internally generated goodwill •Intangible assets arising from research •Internally generated brands, publishing titles, customer lists, and items of similar substance. For example, Coca-cola cannot recognize the brand of the asset, but it can recognize brands that they have bought.

Name examples of intangible assets with finite useful life.

Software, patent, development cost for a car.

How is the depreciable amount of an intangible asset with a finite useful life allocated?

Systematic over its useful life.

When does the entity regard the intangible asset with indefinite useful life?

When analysis shows that there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity.

How is the subsequent measurement after recognition done for an intangible asset? (2 models)

With the cost model and the revaluation model. According to the cost model, an intangible asset should be carried at cost less any accumulated depreciation and (if any) accumulated impairment losses. The revaluation model: Fair value at date of revaluation less accumulated depreciation (if any) and less accumulated impairment losses. This gives the revalued amount.

Is an intangible asset with finite useful life amortized (depreciated)?

Yes.

If an intangible asset is revaluated, what value is used, and which is the condition to be able to revaluate at fair value?

Yes. The revalued amount should be fair value of the asset, but if an active market is not available, the revaluation model cannot be used.