ACCOUNTING
Week 3 Intangibles.pptx

Week 3 Intangibles.pptx - INTANGIBLES MFRS 138 Definition...

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INTANGIBLES MFRS 138
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Definition Intangible asset – identifiable non-monetary asset without physical substance and: i) controlled by the entity as a result from past events, and ii) probable economic benefit will inflow into the entity
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Definition Intangible asset is resources controlled by the company either through legal control or public perceptions e.g. brands, customer list, copyright, trade mark, patent, license, design and etc. The term identifiable means that: i) The asset can either be acquired or transfer separately, normally with legal right over the resources e.g. patent, trade mark and copyright. ii) The asset can be seen as exist but couldn’t be separated from its host e.g. location, unique work ethic and goodwill. It is because separable is one of the criteria to prove the asset can be identified but it doesn’t act as essential feature of intangible asset.
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Definition The term controlled (either legal or non-legal right) means that an entity can enjoy the future benefit and reward from the asset and able to prevent other form accessing the asset without permission e.g. legally enforceable right over copyright. The entity can probably enjoy the future benefit and reward from intangible asset in the form of sale of products or services, or reduction in operating expenditures (cost savings).
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Recognition and measurement Any intangible asset can only be recognized if it satisfy the followings: i) Satisfy the definition of intangible asset. ii) Probable economic benefits will inflow. iii) The related costs can be reliably measured. Entity need to exercise through judgment while assessing the degree of certainty that the asset will generate future economic benefits. The most important principle is most internally generated intangible assets might fail the recognition criteria except for development cost (applied with specific rules). The cost of internally generated intangible asset especially goodwill are difficult to be reliably measured initially, thus it failed the recognition criteria.
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Recognition of an expense If an intangible item does not meet both the definition of and the criteria for recognition as an intangible asset, standard requires the expenditure on this item to be recognised as an expense when it is incurred
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Initial measurement Intangibles can be acquired: by separate purchase as part of a business combination by a government grant by exchange of assets by self-creation (internal generation)
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Initial measurement Type 1 (Purchases): The above approach only applicable to intangible asset that can be separately acquired normally through purchases e.g. trade mark, patent, copyright, design and etc.
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