3/18/2020 IAS 38 Intangible Assets

Module 4: Accounting for assets and liabilities - part 1 9 / 34

IAS 38 Intangible Assets

“An intangible asset is an identifiable non-monetary asset without physical substance.”

(IAS 38 paragraph 8)
 
To be recognised in the financial statements, an intangible asset must:
i. meet this definition, and
ii. meet the IAS 38 recognition criteria.
(IAS 38 paragraph 18)

Definition

In order to be considered for recognition as an intangible asset, an item must be:

 
  
The item must either be capable of being sold as a single item or must
 Identifiable
arise from contractual rights
The item must not be cash or an asset to be settled in a fixed amount
 Non-monetary
of cash
The item must be controlled by the entity as a result of past events
 An Asset
and result in probable future economic benefits
 

Therefore:
Internally generated goodwill is not identifiable and cannot be recognised as an intangible
asset
A receivable is monetary and cannot be recognised as an intangible asset
Staff members are not controlled by an entity (an asset) and so cannot be recognised as an
intangible asset and nor can the costs of training them.
 
Recognition
 
The basic IAS 38 recognition criteria are the same as those in IAS 16:
It is probable that future economic benefits associated with the item will flow to the entity
and
The item's cost can be measured reliably.
(IAS 38 paragraph 21)
 
 
It is usually more difficult for intangible assets to meet these criteria than tangible assets.
Generally the cost of most internally generated intangibles cannot be distinguished from the

https://equals.accaglobal.com/CertIFR19t/page5061.html 1/3
3/18/2020 IAS 38 Intangible Assets

cost of4:developing
Module Accountinga for
business
assetsas a whole.
and liabilities - part 1 9 / 34
 
Certain items are therefore not recognised. IAS 38 prohibits the recognition of internally
generated:
 
Brands
Mastheads
Publishing titles
Customer lists.
 

(IAS 38 paragraph 63)

 
Development expenditure
 
As a result of the difficulties of applying the basic recognition criteria to internally generated
assets, IAS 38 provides additional criteria to be applied to research and development
expenditure.

Research Development

Work to gain new knowledge and Application of research findings for

understanding commercial purpose

Must be recognised as expense in Must be capitalised if specific criteria

profit or loss met (otherwise recognised as expense)

Criteria:
technically feasible
intention to complete
ability to sell asset
probable benefits
can complete project
can measure reliably

https://equals.accaglobal.com/CertIFR19t/page5061.html 2/3
3/18/2020 IAS 38 Intangible Assets

Module 4: Accounting for assets and liabilities - part 1 9 / 34

(IAS 38 paragraph 8, 54, 57)

© 2019 Association of Chartered Certified Accountants

https://equals.accaglobal.com/CertIFR19t/page5061.html 3/3