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PAS 38 - PAS 38 INTANGIBLEASSETS MODULEOBJECTIVES...

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    PAS 38 INTANGIBLE ASSETS
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MODULE OBJECTIVES Understand the nature of intangible assets. Initially recognize intangible assets Review the accounting for research and development costs. Discuss the measurement principles of intangible assets subsequent to initial recognition, including impairment and revaluation of intangible assets Properly account for subsequent expenditures on intangible assets Identify disclosure requirements for intangible assets.
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SCOPE PAS 38 applies to all intangible assets except: Financial assets Mineral rights and exploration costs incurred by mining and oil and gas companies Intangible assets arising from insurance contracts issued by insurance companies. Other intangible assets covered by another IFRS.
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INTANGIBLE ASSET An intangible asset is an identifiable non- monetary asset without physical substance. Examples are Computer software Patents Copyrights Motion picture films Customer lists Franchises Customer or supplier relationships
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3 CRITICAL ATTRIBUTES OF AN  INTANGIBLE ASSET Identifiability Separable Arises from contractual or other legal rights Control Power to obtain future economic benefits from the asset and restricts the access of others to those benefits. Future economic benefits From sale of products or services From cost savings Other benefits from the use of the asset
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RECOGNITION An intangible asset shall be recognized if: It is probable that the expected future economic benefits that are attributable to the asset will flow to the entity. The cost of the asset can be measured reliably .
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INITIAL MEASUREMENT Initially measured at cost . The cost assigned will depend on the specific manner of acquiring the intangible asset. - Separate acquisition - Acquisition in a business combination - Acquisition by way of government grant - Through exchanges of assets - Internal generation of assets (self-creation )
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SEPARATE ACQUISITION Cost includes: Purchase price, net of discounts and rebates but including import duties and non-refundable purchase taxes Directly attributable costs of preparing the asset for use, which include Employee benefits Professional fees Costs of testing
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ACQUISITION  AS PART OF BUSINESS COMBINATION Recognize separately from goodwill and measure at fair value at the acquisition date. If the fair value cannot be measured reliably, the asset is not individually recognized but is included in the value assigned to goodwill.
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EXCHANGE OF ASSETS At fair value unless the exchange transaction lacks commercial substance. When fair value is not determinable, cost is the carrying amount of the asset given up (plus cash paid or minus cash received).
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ILLUSTRATIVE EXAMPLE - EXCHANGE Exchange of assets JKL COMPANY exchanged its patent with equipment owned by MNO Company. Details follow: JKL (Patent) MNO (Eqpt) Cost P10,000 P12,000 Accumulated depreciation/amort. 4,000 5,500 Book values P 6,000 P 6,500 Fair value 8,000 P 6,000 Cash paid P 2,000 Required: Prepare entries to record the exchange.
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