Week 2 Lecture Slides-PART 1_4 Slides.pdf

The exception to this is subsequent development

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The exception to this is subsequent development expenditures which meets the criteria of para. 57 (technical feasibility, etc. ) Measurement after initial recognition Amortisation of intangible assets Assess whether the useful life is finite or indefinite Finite (e.g. a limited legal life/contractual term Amortisation principles same as for PP&E Straight-line method most commonly used Residual value assumed to be zero in most cases Amortisation period generally over legal life / term of contract or shorter (it can be longer when contract renewal is allowed) Indefinite (no foreseeable end to useful life) no amortisation charge subject to annual impairment tests ED231 Clarification of Acceptable Methods of Depreciation and Amortisation - Revenue based method should not be applied - Focus on consumption of economic benefits - Further guidance – diminishing balance method RE technical / commercial obsolescence
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8 Topic 4 Retirement and disposal Retirements & disposals The accounting is identical to that required under AASB 116 Property, Plant & Equipment Derecognise on disposal or when no future economic benefits are expected Calculate amortisation (if any) to date of disposal Gain or Loss = Proceeds of disposal – Carrying amount Amortisation of a finite useful life intangible asset does not cease when an asset becomes idle Topic 5 Disclosure Disclosure AASB 138 requires Disclosures for each class of intangible asset (para. 118) Examples include, brand names, mastheads, computer software (para. 119) Figures 11.8: Provides an example of the disclosures required in Note 1 (summary of significant accounting policies) Figure 11.9 – Notes to the financial statements Figure 11.10 Wesfarmers
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9 Proposals for changes: accounting for internally generated intangibles In 2008, the AASB published a Discussion Paper (DP) entitled Initial Accounting for Internally Generated Intangible Assets. Research for this DP was at the request of the IASB AASB 138 requires outlays relating to internally generated intangibles to be classified as research and development Strict criteria must be met before any development outlays can be capitalised The DP analyses different ways in which internally generated intangibles could be recognised Planned vs unplanned assets A hypothetical business combination Use of indicators Two other issues in the DP 1. Measurement of fair value using level 3 inputs (refer to CH 5 re FV) 2. A disclosure only reporting approach Innovative measure of intangibles: market value of an entity
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