INTANGIBLE ASSETS

PAS 38, paragraph 8, defines intangible asset as

follows:
 it is an identifiable nonmonetary asset without physical substance.
 the intangible asset must be controlled by entity as a result of past event from
whch future economic benefits are expected to flow to the entity.

 The definition of itangible asset requires that an intangible asset must be

identifiable in order to distinguish it clearly from goodwill.
 with nonphysical item, there may be a problem with identifiability.

An asset is identifiable when only

• It is seperable - means that asset is capable of being separated from the

entity.
• It arises from contractual or other legal rights - it is regardless of whether
such rights are transferable or separable.
PAS 38, paragraph 24 - an intangible asset shall be measured initially
at cost

Cost of an intangible asset depends on the following:

 Separate Acquisition - the cost of intangible asset can be measured

reliably, particularly so if the purchase consideration is in the form of cash or
other monetary assets.
 Acquisition as part of a business combination - the cost of the intangible
asset is based on the fair value on the date of acquisition.
 Acquisition by way of a government grant - an intangible may be
acquired by way of a government grant, free of charge or for nominal
consideration.
- it is initially recorded at either: a) Fair Value b) Nominal amount or zero plus
any expenditure.
 Acquisition by exchange - cost of intangible asset is measured at fair
value of the asset given up + any cash payment.
 Acquisition by self-creation or internal generation - cost of internally
generated intangible asset comprises all directly attributable costs.
PAS 38, paragraph 63, provides that internally generated brands,
mastheads, publishing titles, customer lists and items similar in
substance shall not be recognized as intangible asset.
- it pertains to identifiable intangible assets.

PAS 38, paragraph 97, states that intangible assets with limited
or finite life are amortized over their useful life.

Paragraph 107 and 108 - intangible assets with indefinite life are
not amortized but are tested for impairment at least annually and
whenever there is an indication that intangible asset may be
impaired.
 Sample Problem
Dream Company reported the following data at year-end:

Franchise 1,000,000
Computer software 1,500,000
Deferred charges 100,000
Patent 2,500,000
Customer list purchased 500,000
Copyright 700,000
Trademark 900,000
Goodwill 4,000,000
Research and development cost 2,000,000
Bond Sinking fund 1,300,000

What is the total amount should be reported as intangible assets?

Solution:
Franchise 1,000,000
Computer Software 1,500,000
Patent 2,500,000
Customer 500,000
Copyright 700,000
Goodwill 4,000,000
Trademark 900,000
Total intangible assets 11,100,000