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Lecture_Intangible Assets (PAS 38)

Chapter 20 of PAS 38 defines intangible assets as identifiable nonmonetary assets without physical substance that are controlled by an entity and expected to provide future economic benefits. It outlines criteria for identifying intangible assets, including identifiability, control, and future economic benefits, and distinguishes between identifiable and unidentifiable intangible assets. The chapter also details the initial measurement of intangible assets, emphasizing that costs related to their acquisition or internal generation must be accounted for, while certain expenditures, such as start-up and training costs, are expensed when incurred.

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7 views

Lecture_Intangible Assets (PAS 38)

Chapter 20 of PAS 38 defines intangible assets as identifiable nonmonetary assets without physical substance that are controlled by an entity and expected to provide future economic benefits. It outlines criteria for identifying intangible assets, including identifiability, control, and future economic benefits, and distinguishes between identifiable and unidentifiable intangible assets. The chapter also details the initial measurement of intangible assets, emphasizing that costs related to their acquisition or internal generation must be accounted for, while certain expenditures, such as start-up and training costs, are expensed when incurred.

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andreagirlygirl
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© © All Rights Reserved
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CHAPTER 20: INTANGIBLE ASSETS (PAS 38)

INTANGIBLE ASSET
 An intangible asset is simply defined as an identifiable nonmonetary asset without physical substance.
 The intangible asset must be controlled by the entity as a result of past event and from which future economic
benefits are expected to flow to the entity.

Accordingly, there are three essential criteria in the definition of an intangible asset, namely:
a. Identifiability
b. Control
c. Future economic benefits
A. An asset is identifiable when:
a. It is separable.
b. It arises from contractual or other legal right.
B. Control is the power of the entity to obtain the future economic benefits flowing from the intangible asset and
restrict the access of others to those benefits. In other words, the entity must be able to enjoy the future
economic benefits from the asset and prevent others from enjoying the same benefits.
C. Future economic benefits may include revenue from the sale of products, cost savings or other benefits
resulting from the use of the asset by the entity.

Identifiable intangible assets (PAS 38)


Identifiable intangible assets include patent, copyright, franchise, trademark, customer list, computer software and
broadcasting license.

Unidentifiable intangible asset


An intangible asset is unidentifiable if it cannot be sold, transferred, licensed, rented or exchanged separately.
The unidentifiable intangible asset squarely describes a goodwill.

Initial measurement of intangible asset


PAS 38, paragraph 24, provides that an intangible asset shall be measured initially at cost. The cost of a separately
acquired intangible asset comprises:
a. Purchase price
b. Import duties and nonrefundable purchase tax
c. Directly attributable costs of preparing the asset for the intended use, such as professional fee arising directly
from bringing the asset to its working condition and cost of testing the asset.

Internally generated intangible asset


The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create,
produce and prepare the asset for the intended use. Directly attributable costs include:
a. Cost of materials and services used or consumed in generating the intangible asset.
b. Cost of employee benefit arising from the generation of the intangible asset.
c. Fee to register a legal right.

 PAS 38, paragraph 63, explicitly provides that internally generated brand, masthead, publishing title, customer list
and other item similar in substance shall not be recognized as intangibles asset.
 PAS 38, paragraph 48, provides that internally generated goodwill shall not be recognized as an asset.

Expenditures expensed when incurred


a. Start-up cost – Start-up cost may consist of organization cost such as legal cost incurred in establishing a legal
entity, preopening cost or expenditure to open a new facility or business, and pre-operating cost or expenditure
for commencing new operation or launching new product.
b. Training cost to operate the asset
c. Advertising and promotional cost
d. Business relocation or reorganization cost
e. Selling and administrative overhead

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