item of property, plant and equipment in accordance with IAS 16. Start-up costs may consist of establishment costs such as legal and secretarial costs incurred in establishing a legal entity, expenditure to open a new facility or business (i.e. pre-opening costs) or expenditures for starting new operations or launching new products or processes (i.e. pre-operating costs).b.Expenditure on training activities.c.Expenditure on advertising and promotional activities (including mail order catalogues).d.Expenditure on relocating or reorganizing part or all of an entity.Measurement subsequent to acquisition: intangible assets with finite livesThe cost less residual value of an intangible asset with a finite useful life should be amortized on a systematic basis over that life:a.The amortization method should reflect the pattern of benefits.b.If the pattern cannot be determined reliably, amortize by the straight line method.c.The amortization charge is recognized in profit or loss unless another IFRS requires that it be included in the cost of another asset.d.The amortization period should be reviewed at least annually.Amortization of an intangible asset is over its legal life or useful life whichever is shorter.The residual value of an intangible asset is presumed to be zerounless a third party is committed to buy the intangible assetat the end of its useful life or unless there is an active market.Measurement subsequent to acquisition: intangible assets with indefinite useful livesAn intangible asset with an indefinite useful life should not be amortized.Its useful life should be reviewed each reporting period to determine whether events and circumstances continue to support an indefinite useful life assessment for that asset.The change in the useful life assessment from indefinite to finite should be accounted for as a change in an accounting estimate.The asset should also be assessed for impairment in accordance with PAS 36.Other accounting issuesLegal fees for prosecuting or defending an intangible asset(patent, copyright, trademark), whether successfully or unsuccessfully, shall be expensed.Cost of franchiseincludes the initial franchise feeplus directly attributable costs.Periodic paymentsmade by the franchisee to the franchisor is considered as an outright expense.Leasehold improvementis classified as property, plant and equipmentModule 5Page 7 of 12
Module 5: Nonfinancial Assets Part 1LVCService concession is accounted as an intangible assetif the operator receives a right to charge for use of a public sector asset that it constructs or upgrades and then must operate and maintain for a specified period of time. Service concessionis accounted as a financial assetif the operator receives an unconditional contrac-tual right to receive a specified or determinable amount of cash or another financial assetfrom the govern-ment in return for constructing or upgrading a public sector asset, and then operating and maintaining the asset for a specified period of time.