intangible asset

• If another Standard prescribes the accounting for a specific type of intangible asset, an entity applies that Standard instead of this Standard
• Examples of intangible assets not covered by this Standard

  • Intangible assets held by an entity for sale in the ordinary course of business
  • Deferred tax assets
  • Leases
  • Assets arising from employee benefits
  • Financial assets as defined in IAS 32 Financial Instruments: Presentation
  • Goodwill acquired in a business combination
  • Deferred acquisition costs, and intangible assets, arising from an insurer's contractual rights under insurance contracts
  • Non-current intangible assets classified as held for sale
• Intangible asset


  Identifiable, non-monetary item without physical substance, which is within the control of the entity and is capable of generating future economic benefits for the entity
• Active market


  A market in which the items traded are homogenous, willing buyers and sellers can be found at any time and prices are available to the public
• Identifiable asset


  • Separable, i.e. is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so
  • Arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations
• Residual value


  The estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life
• Useful life


  • The period over which an asset is expected to be available for use by an entity
  • The number of production or similar units expected to be obtained from the asset by an entity
• Research


  The original planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding
• Development


  The application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes or services before the start of commercial production
• Amortisation


  The systematic allocation of the depreciable amount of an intangible asset over its useful life
• An intangible asset shall be recognised if, and only if: (a) it is probable that future economic benefits that are attributable to the asset will flow to the entity; and (b) the cost of the asset can be measured reliably
• An entity shall assess the probability of expected future economic benefits using reasonable and supportable assumptions that represent management's best estimate of the set of economic conditions that will exist over the useful life of the asset
• An intangible asset shall be measured initially at cost
• Separate acquisition


  The cost of a separately acquired intangible asset can usually be measured reliably. This is when the purchase consideration is in the form of cash or other monetary assets
• Components of the cost of a separately acquired intangible asset

  • Purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates
  • Any directly attributable cost of preparing the asset for its intended use
• Directly attributable costs


  • Costs of employee benefits arising directly from bringing the asset to its working condition
  • Professional fees arising directly from bringing the asset to its working condition
  • Costs of testing whether the asset is functioning properly
• Research or development expenditure that relates to an in-process research or development project acquired separately or in a business combination and recognised as an intangible asset, and is incurred after the acquisition of that project shall be accounted for in terms of this Standard
• Exchange of assets


  Intangible assets may be acquired in exchange for a non-monetary asset or asset. The cost is measured at fair value. If the acquired asset is not measured at fair value, its cost is measured at the carrying amount of the asset given up
• If an intangible asset acquired in a business combination is separable or arises from contractual or other legal rights, sufficient information exists to measure reliably the fair value of the asset
• An intangible asset acquired in a business combination might be separable, but only together with a related contract, identifiable asset or liability. In such cases, the acquirer recognises the intangible asset separately from goodwill, but together with the related item
• Government grant


  Initially recognition at either fair value or normal value plus direct expenses to prepare for use
• Internally generated goodwill shall not be recognised as an asset
• Internally generated intangible assets

  1. Research phase: No intangible asset arising from research (or from the research phase of an internal project) shall be recognised. Expenditure on research (or on the research phase of an internal project) shall be recognised as an expense when it is incurred

  2. Development phase: An intangible asset arising from development is recognised if, and only if, each of the following can be demonstrated: (a) the technical feasibility of completing the asset; (b) its intention to complete and use or sell the asset; (c) its ability to use or sell the asset; (d) how the asset will generate future economic benefit; (e) the availability of sufficient resources to complete the development ant us or sell the asset; (f) the ability to measure reliably the expenditure incurred on the asset during its development
• Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance shall not be recognised as intangible assets
• Measurement after recognition


  An entity shall choose either the cost model or the revaluation model as its accounting policy. If an intangible asset is accounted for using the revaluation model, all the other assets in its class shall also be accounted for using the same model, unless there is no active market for those assets
• Cost model


  After initial recognition, an intangible asset shall be carried at its cost less any accumulated amortisation and any accumulated impairment losses
• Revaluation model


  After initial recognition, an intangible asset shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated amortisation and any subsequent accumulated impairment losses. For the purpose of revaluations under this Standard, fair value shall be measured by reference to an active market
• Revaluations shall be made with such regularity that at the end of the reporting period the carrying amount of the asset does not differ materially from its fair value
• Accounting for revaluation changes

  • If an asset's carrying amount is increased as a result of a revaluation: the increase shall be recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus; or the increase shall be recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss
  • If an asset's carrying amount is decreased as a result of a revaluation: the decrease shall be recognised in profit or loss; or the decrease shall be recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity under the heading of revaluation surplus
• The effects of taxes on income, if any, resulting from the revaluation of property, plant and equipment are recognised and disclosed in accordance with IAS 12 Income Taxes
• Revaluation of property, plant and equipment

  The effects of taxes on income, if any, are recognised and disclosed in accordance with IAS 12 Income Taxes
• Increase in asset's carrying amount due to revaluation


  1. Recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus

  2. Recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss
• Decrease in asset's carrying amount due to revaluation

  1. Recognised in profit or loss

  2. Recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset
• Useful life of an intangible asset


  Finite or indefinite, assessed by the entity based on analysis of relevant factors
• Useful life of an intangible asset from contractual or legal rights

  Not to exceed the period of the contractual or legal rights, may be shorter depending on the period the entity expects to use the asset
• Useful life of a reacquired right recognised as an intangible asset in a business combination


  The remaining contractual period of the contract in which the right was granted, does not include renewal periods
• Intangible assets with indefinite useful lives


  • Not amortised
  • Tested for impairment annually and whenever there is an indication of impairment
• Review of useful life assessment for intangible assets not being amortised

  1. Determine whether events and circumstances continue to support an indefinite useful life assessment

  2. If not, change the useful life assessment from indefinite to finite, accounted for as a change in accounting estimate
• Factors to consider when determining the useful life of an intangible asset

  • Expected usage of the asset and whether it could be managed efficiently by another management team
  • Typical product life cycles and public information on estimates of useful lives of similar assets
  • Technical, technological, commercial or other types of obsolescence
  • Stability of the industry and changes in market demand
  • Expected actions by competitors or potential competitors
  • Level of maintenance expenditure required to obtain expected future economic benefits
  • Period of control over the asset and legal or similar limits on use
  • Useful life dependent on useful life of other assets
• Amortisation of intangible assets with finite useful lives

  1. Depreciable amount allocated on a systematic basis over the useful life

  2. Amortisation begins when the asset is available for use

  3. Amortisation ceases at the earlier of the date the asset is classified as held for sale or derecognised

  4. Amortisation method reflects the pattern of consumption of future economic benefits