Internally generated intangible assets

Costs that may not be capitalised

• The costs relating to many internally generated intangible items

cannot be capitalised and are expensed as incurred. This includes
expenditures on internally generated:
- brands
- mastheads
- customer lists
- publishing titles
- goodwill

PwC's Academy July 2016

PwC Slide 71
Subsequent measurement

• Similar to PPE, an entity must choose as its accounting policy:

- the cost model, or
- the revaluation model
• If an intangible asset is accounted for using the revaluation model, all
the other assets in its class must also be accounted for using the same
model, unless there is no active market for those assets
• Both the cost model and the revaluation model are applied in a
consistent manner with the equivalent models in IAS 16

An important distinction must

however be made between
intangible assets with a finite life,
and those with an indefinite life
PwC's Academy July 2016
PwC Slide 72
Subsequent measurement
Finite vs indefinite useful life assets
Intangible assets with a
finite useful life
• Have a limited period of benefit
to the entity
• Amortisation is carried out on a
systematic basis over the useful
life of the intangible asset
• Considered for impairment
when there is an indication that
the asset has been impaired
PwC's Academy
PwC
Intangible assets with an
indefinite useful life
• No foreseeable limit to the
period over which the asset is
expected to generate net cash
inflows for the entity
• Not amortised
• Tested annually for impairment
and whenever there is an
indication of impairment
July 2016
Slide 73
Subsequent measurement
Indefinite useful life assets

• Extract from an accounting policy for intangible assets

An entity must test

the IA for
impairment at least
annually or
whenever there is
an impairment
indicator

Source:
GO p.l.c. 31 December 2011

PwC's Academy July 2016

PwC Slide 74
Amortisation
Changes in estimates

• Similar to PPE, the residual value and the useful life of an asset are
estimated when the asset is acquired
- requirement to be reviewed at least at each financial year-end
• If subsequent expectations differ from previous estimates, the
change(s) are accounted for as a change in an accounting estimate in
accordance with IAS 8
- the change is reflected prospectively, i.e. past accounting entries
are not amended

PwC's Academy July 2016

PwC Slide 75
Retirements and disposals

• Similar to PPE, an intangible asset is derecognised:

- on disposal; or
- when no future economic benefits are expected from its use or
disposal.
• The gain or loss upon derecognition is equal to the difference
between net disposal proceeds and carrying amount of the asset
- this is recognised in profit or loss when asset is derecognised
- gains may not be classified as revenue

PwC's Academy July 2016

PwC Slide 76
Disclosures
An overview

• The financial statements must disclose, for each class of intangible

asset, and distinguishing between internally generated intangible
assets and other intangible assets:
- accounting policy, including:
◦ whether the useful lives are indefinite or finite and, if finite, the
useful lives or the amortisation rates used
◦ the amortisation methods used for intangible assets with finite
useful lives
- the gross carrying amount and any accumulated amortisation
(aggregated with accumulated impairment losses) at the beginning
and end of the period, together with a reconciliation from opening
to closing balances

PwC's Academy July 2016

PwC Slide 77
Intangible assets
Disclosure: accounting policy

Intangible assets
are initially
measured at cost

The value of
intangible assets
is amortised over
its useful life

Source: GO p.l.c. 31 December 2011

PwC's Academy July 2016

PwC Slide 78
Disclosures
Other disclosures

An entity must also disclose:

• the line item(s) of the income statement in which any amortisation of
intangible assets is included
• for an intangible asset assessed as having an indefinite useful life, the
carrying amount of that asset and the reasons supporting the
assessment of an indefinite useful life
- a description of the factor(s) that played a significant role in
determining that the asset has an indefinite useful life must be
provided
• a description, the carrying amount and remaining amortisation
period of any individual intangible asset that is material to the
entity’s financial statements

PwC's Academy July 2016

PwC Slide 79
Disclosures
Other disclosures (continued)

• for intangible assets acquired by way of a government grant and

initially recognised at fair value:
- the fair value initially recognised for these assets
- their carrying amount, and
- the measurement basis (cost or revaluation model)
• the existence and carrying amounts of intangible assets whose title is
restricted and the carrying amounts of intangible assets pledged as
security for liabilities
• the amount of contractual commitments for the acquisition of
intangible assets
• the aggregate amount of research and development expenditure
recognised as an expense during the period
PwC's Academy July 2016
PwC Slide 80
Disclosures
Other disclosures: revaluation model

Similar to PPE
• If intangible assets are accounted for at revalued amounts, an entity
must disclose the following:
- by class of intangible assets:
◦ the effective date of the revaluation
◦ the carrying amount of revalued intangible assets, and
◦ the carrying amount that would have been recognised had the
revalued class of intangible assets been measured after
recognition using the cost model,
- the methods and significant assumptions applied in estimating the
assets’ fair values

PwC's Academy July 2016

PwC Slide 81
Disclosures
Other disclosures: revaluation model (continued)

- the amount of the revaluation surplus that relates to intangible

assets at the beginning and end of the period, indicating the
changes during the period and any restrictions on the distribution
of the balance to shareholders; and

PwC's Academy July 2016

PwC Slide 82
Disclosures
Voluntary disclosures

• An entity is encouraged, but not required, to disclose the following

information:
- a description of any fully amortised intangible asset that is still in
use; and
- a brief description of significant intangible assets controlled by the
entity but not recognised as assets because they did not meet the
recognition criteria in this Standard or because they were acquired
or generated before the version of IAS 38 Intangible Assets issued
in 1998 was effective

PwC's Academy July 2016

PwC Slide 83
www.pwcacademy.com.mt

This material has been prepared for general guidance on matters of interest only, and does not
constitute professional advice. You should not act upon the information contained in this
material without obtaining specific professional advice. No representation or warranty (express
or implied) is given as to the accuracy or completeness of the information contained in this
material, and, to the extent permitted by law, PricewaterhouseCoopers, its members,
employees and agents do not accept or assume any liability, responsibility or duty of care for
any consequences of you or anyone else acting, or refraining to act, in reliance on the
information contained in this material or for any decision based on it.

© 2012 PricewaterhouseCoopers. All rights reserved. PwC refers to the Malta member firm,
and may sometimes refer to the PwC network. Each member firm of which is a separate legal
entity. Please see www.pwc.com/structure for further details.