Week 2 Lecture Slides-PART 1_4 Slides.pdf

Intangibles that fail the recognition criteria must

Info icon This preview shows pages 4–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Intangibles that fail the recognition criteria must be expensed. Intangibles are required to be initially measured at cost Similar to AASB 116 Property, Plant and Equipment Recognition & initial measurement Criteria for recognition and initial measurement AASB 138 analyses four ways intangibles may be acquired: 1. By separate acquisition 2. Acquisition as part of a business combination 3. Acquisition by way of a government grant 4. Internally generated Each of these options are discussed in detail on the following slides.
Image of page 4

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5 Recognition & initial measurement 1. Separate acquisition AASB 138 considers that the probability recognition criteria is always considered to be satisfied for separately acquired intangibles Cost can usually be measured reliably, although there may be issues where the acquirer is giving up non-monetary assets, rather than cash Cost = Purchase price + directly attributable costs Recognition & initial measurement 2. Acquisition in a business combination Intangibles acquired as part of a business combination are not initially measured at cost, but at fair value in accordance with AASB 3 Business Combinations Fair value measures used may include: quoted market prices in an active market > rare for intangibles that an active market exists recent transactions in the same or similar items > due to the unique nature of intangibles this is also uncommon using other measurement techniques > e.g. PV/earnings multiple techniques Probability criterion for intangibles is always satisfied in a business combination Probability is reflected in measurement Recognition & initial measurement 3. Acquisition via government grant AASB 138 (para. 44) observes Some intangible assets are allocated to entities via government grants Examples include: TV station operating licences Radio licences Accounted for under AASB 120 Accounting for Government grants and Disclosure of Government Assistance Recognition & initial measurement 4. Internally generated intangible assets The issue – at what point to recognise an asset From the start? When success is imminent? Determining when to commence capitalising costs depends on whether the asset was generated in the research or development phase Research Original planned investigation to gain knowledge, understanding (earlier stages of a project) E.g. the search for new knowledge/ search for alternative processes Accounting treatment > all research costs are expensed
Image of page 5
6 Recognition & initial measurement 4. Internally generated intangible assets Development E.g. The design and construction of a pilot plant/ design of pre-production prototypes Accounting treatment development costs that meet the recognition criteria (refer next slide) may be capitalised expenditure from the date the recognition criteria was first met can be capitalised previously expensed items cannot be reinstated and capitalised … the application of research findings/knowledge - to a plan or design - for the production of new or substantially improved - materials, devices,
Image of page 6

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern