Chapter 8 “Intangible Assets”
Covered by AASB 138/ IAS 38
Intangible Assets
- are non-monetary assets without physical substance
- includes patents, goodwill, mastheads, brand names, copyrights, r&d, and trademarks
- must be separately disclosed in the statement of financial position (balance sheet)
Class of intangible assets
1. Internally generated
- specific value can’t be placed on each individual asset, and they cant be
separately identified and sold
- Not separable and not identifiable
- Costs incurred as expense
- cannot be revalued
2. Purchased
- a specific value can be placed on each individual asset and can be separately
identified and sold.
- acquired intangibles includes patents, goodwill, mastheads, brand names,
copyrights, r&d, and trademarks
- separable and identifiable
- costs incurred shown as asset
- can be revalued if there is an active market
Amortisation
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Limited Life
- Amortised (begins when the asset is available for use)
- Time period (max 20 years) or expected production units
- residual amount zero
Indefinite life
- not amortised but impaired
- carrying amount less recoverable amount
Research and Development (a special case studied with intangibles)
- may account for a large proportion of expenditure for some entities.
- AASB 138 applies the simplifying assumption that all expenditure undertaken in the
research and development is to be expensed.
Research
- considered separately from development
- defined as original and planned investigation undertaken with the prospect of gaining
new scientific or technical knowledge and understanding.
Development
- (AASB 138, para 8) application of research findings or other knowledge to a plan or
design for the production of new or substantially improved materials, devices, products,
processes, systems or services prior to the commencement of commercial production or use
- typically involves the commercial application of knowledge generated in earlier
research phases.
- examples on lecture slide # 23
Please note: lecture slides: 24 and 26
Good Will (a special case of unidentifiable intangible)
- Internally-generated: shown as an expense
- Acquired: Shown as an asset
: Cost of acquisition less FV of net assets and contingent liabilities.
: Impairment loss is recognised.
: Revaluation is not allowed.
- Necessary to allocate purchased goodwill to specific cash-generating units
- If recoverable amount of a cash generating unit is below its carrying amount, then any
amount of goodwill attributed to that unit must firstly be reduced.
- Please take note lecture slide: 42