Examples of assets fitting into this category generally relate to situations

Examples of assets fitting into this category

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granted to an entity are not transferable except by sale of the entity as a whole. Examples of assets fitting into this category generally relate to situations where a government gives or sells a right to an entity, such as: o an entity has a right to use 2 million liters of water per annum in its production process. o an entity has a right to emit a specified quantity of greenhouse gases into the atmosphere per annum. A condition of receiving this right is that the right cannot be transferred between entities; hence, if an entity used only 1 million litres of water, it could not sell/transfer the remaining right to 1 million litres of water to another entity. The right is then not separable . However the IASB believed that these assets could be distinguished from other assets held by an entity and should be disclosed as intangible assets . Separability was then not seen as the only criterion for identifiability. Lack of physical substance = It is the characteristic that separates assets such as property, plant and equipment from intangible assets, in that property, plant and equipment would generally meet both the other criteria of an intangible asset. Note at the outset that some intangible assets may be associated with a physical item, such as software contained on a computer disk. However, the asset is really the software and not the disk itself. Use of the physical substance characteristic is interesting in that paragraph 4.11 of the Conceptual Framework states: physical form is not essential to the existence of an asset; hence patents and copyrights, for example, are assets if future economic benefits are expected to flow from them to the entity and if they are controlled by the entity. If physical substance is not intrinsic to the determination of assets, why then is it necessary to distinguish between physical and non-physical assets? Intangibles are inherently difficult to trade. Legal property rights are often hazy, contingent contracts are difficult to draw, and the cost structure of many intangibles (large sunk costs, negligible marginal costs) is not conducive to stable pricing. Accordingly, at present there are no active, organized markets in intangibles. This could soon change with the advent of Internet-based exchanges, but it will require specific enabling mechanisms, such as valuation and insurance schemes. Private trades in intangibles in the form of licensing and alliances proliferate, but they do not provide information essential for the measurement and valuation of intangibles. 13.1.4 The definition of an asset and identifying intangible assets . According to paragraphs 13–16 of IAS 38, items such as market and technical knowledge (paragraph 14), staff skills , specific management or technical talent (paragraph 15) and a portfolio of customers , market share , customer relationships and customer loyalty (paragraph 16) do not meet the definition of intangible assets.
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  • Fall '17
  • tangible assets, Intangible asset

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