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IFRS CH 7 Intangible Assets

CH 07 and CH 16 - IAS 38 Intangible Assets and Goodwill - IAS 08 Policies, Errors & Estimates, IFRS 05 Held for Sale and IAS 10 EARP

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9 views

IFRS CH 7 Intangible Assets

CH 07 and CH 16 - IAS 38 Intangible Assets and Goodwill - IAS 08 Policies, Errors & Estimates, IFRS 05 Held for Sale and IAS 10 EARP

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a.adel87
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© © All Rights Reserved
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Khaled Shokry, ACCA, ESAA

Chapter 7
IAS 38 INTANGIBLE ASSETS & GOODWILL
Def: IA is an identifiable (esp. If separable) non-monetary asset without
physical substance.

Examples include:
- Patents
- Brand Names
- Licenses
- Copy Rights

Recognition Criteria:
- Probable future economic benefits
- Reliable Measurement

Think in (Advertising/Training Costs/Market share or customer loyalty)

Intangible
Assets
IAS 38

Separate Part of Business Internally


Acquisition combination generated
Cost Model Fair value R&D // Others

Research and Development

Research costs: should be written off as an expense as they incurred.

Development costs : capitalize if it satisfies the criteria (MAIGT):


- Measurement: Expenses can be reliably measured.
- Ability: to use/sell the intangible assets.
Khaled Shokry, ACCA, ESAA

- Intention: to complete and use/sell the intangible asset.


- Generate economic benefits through usage / sell ( existence of Market )
- Technical Feasibility of completing the intangible asset.

Other Internally generated brands, customer lists and similar items


should not be recognized as intangible assets.

MEASUREMENT

Initial Measurement: The cost of the asset is the sum of expenditures


incurred from the date when the intangible asset first meets the
recognition criteria
Subsequent Measurement: Cost Model OR Revaluation model.
- Revaluation model is not applied very frequently for intangible assets
because there must be an active market. (Revaluation should be done
regularly, and should be transferred to RE over the remaining useful life
or when the asset is disposed of, also the entire class of assets should be
revalued not only selected assets)
Amortization: for Assets with Finite Useful Lives.
- Start: when the asset available for use and recorded in profit or Loss.
- Period and method to be reviewed at each year end.
Assets with Indefinite Useful Lives: Not amortized but reviewed at
least annually for Impairment.
Disposal / Retirement : difference between CV and net proceeds
recorded as gain or loss
Khaled Shokry, ACCA, ESAA

IFRS 3 GOODWILL

Purchased Goodwill: is shown in the SOFP as an intangible non-current


asset because it has been paid for.
Not Amortized but reviewed annually for impairment.
Once impaired, No recovery is allowed.

EXAMPLES??

1- Lambada 2 (June/2011): On 1 October 20X7 Lambda began a project to


investigate a more efficient production process. Expenses relating to the
project of $2m were charged in P/L in the year ended 31 March 20X8.
Further costs of $1.5m were incurred in the three-month period to 30 June
20X8. On that date it became apparent that the project was technically
feasible and commercially viable. Further expenditure of $3m was incurred in
the six month period from 1 July 20X8 to 31 December 20X8. The new
process, which began on 1 January 20X9, was expected to generate cost
savings of at least $600,000 per annum over the 10-year period commencing
1 January 20X9.
Required: Compute carrying value of the asset at 31 March 2009.

2- In December 20X0, Dexterity paid $5m for a television adver sing campaign
for its products that will run for 6 months from 1 January 20X1 to 30 June
20X1. The directors believe that increased sales as a result of the publicity
will continue for two years from the start of the advertisements.
(how recognized on 31 /03/ 2001)

3- Dexterity has developed and patented a new drug which has been approved
for clinical use. The costs of developing the drug were $12m. Based on early
assessments of its sales success, Lead brand have estimated its market value
at $20m.
(how recognized on 31 /03/ 2001)

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