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t9 - ACCT 3102 Tutorial 9 Semester 1 09 Accounting for...

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1 ACCT 3102 Tutorial 9 Semester 1 / 09 Accounting for Intangible Assets HPH Chapter 13 - Questions 6 The initial recognition of purchased intangible assets should not involve a great deal of judgement, but the subsequent measurement of purchased intangible assets requires judgements about the following issues. The use of the cost model or revaluation model (in the limited circumstances in which the revaluation model can be used for intangible assets) and whether the assets have finite or indefinite useful lives. To the extent that AASB 138 permits entities to adopt a policy of capitalising internally-developed intangibles, considerable judgement will be necessary in deciding whether future economic benefits are expected to be generated. If such assets are capitalised the issues of subsequent measurement again come to the fore. However, requiring entities to expense all intangibles would be inappropriate where the expenditure on such assets gives rise to future economic benefits. In the context of the Framework, it is inevitable, therefore, that an appropriate accounting policy for research and development costs will require the application of professional judgement.
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2 7 (a) The financial reporting requirements for initial recognition of intangible assets are summarised in Table 13.1: Table 13.1 Requirements for initial recognition and measurement of intangible assets under AASB 138 ‘Intangible Assets’ Accounting issue Method of acquisition of intangible asset Purchased Internally generated Separately Part of business combination Research phase Development phase 1. Definition and recognition Meet definition of intangible asset (para. 8-17) and recognition criteria (para. 21- 23) in AASB138. Meet definition of intangible asset (para. 8-17) and recognition criteria (para. 21- 23) in AASB138. No intangible assets may be recognised as arising from research or the research phase of a project (para. 54). Meet definition of intangible asset (para. 8-17) and recognition criteria (para. 21- 23) in AASB138 AND meet six additional criteria from para 57. Specific prohibition on recognition of internally generated brands, mastheads, publishing titles etc (para. 63). 2. Initial measurement Measured at cost (para. 24). Cost is measured as purchase price plus costs directly attributable to preparing the asset for its intended use. Measured at cost (para. 24). Cost is measured as fair value at acquisition date. Not applicable. Measured at cost (para. 24). Cost is measured as the sum of expenditure incurred from the date the intangible asset first meets the recognition criteria The requirements for subsequent measurement are summarised in Table 13.2: Table 13.2 Procedures for subsequent measurement of intangible assets under AASB 138 ‘Intangible Assets’ Measurement base Cost model Revaluation model Carrying amount Intangible asset carried at cost less accumulated amortisation and any accumulated impairment losses.
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