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2. Intangible Assets IAS 38
Presented By
Nadeem waris
Adnan Zafar
Farhan Ali

3. Intangible Assets IAS (38)

4. Introduction
 Intangible assets means an
identifiable, non monetary asset
without a physical substance
 It would include computer
software, patents, copy rights,
motion picture films

5. Basic criterion
 Identifiability
 Control over the resource
 Existence of future economic benefits

6. Intangible Assets IAS (38)

7. Identifiability
 An asset can be said to be “identifiable” if it is either separable or arises from
contractual or legal rights
 It is said to be separable, if it is capable of being separated or divided from the
entity and sold transferred, licensed, rented or exchanged, either individually or
together with a related contract.

8. Control over the resource
 Basis of control is nothing but the power of an entity to obtain future
economic benefits flowing from the underlying resource
 It also means restriction of access of others to those benefits
 Power is obtained through enforceable legal right
 Eg: Economic benefits derived from market and technical knowledge –
protected by legal rights like copy rights

9. Future Economic benefits
 Revenue from sale of software's
 Cost savings
 Other benefits from the use of the assets
 E.g. use of intellectual property in a production process resulting in cost savings
rather than increase in future revenues

10. Recognition and Measurement
 For the purposes of recognition and measurement an entity should:
 Meet the definition criteria
 Meet the recognition criteria
 Three additional conditions are to be met for the recognition of Intangible
assets
Defination
of
intangible
assets
Future
economic
benefits
Cost
measure
reliably
Recognize
d as
intangible
assets

11. Exchange of assets
 If an IA is acquired in exchange of a non monetary
asset it is measured at FV
 It should be noted that:
 The transaction should have commercial substance
 FV of asset given up or acquired is reliably
measureable

12. Recognition of expenses on IA
 If the expenditure fails the definition and/ or recognition
criteria then it is treated as expenditure and not as IA
 In case it is acquired in a business combination and cannot
be recognized as IA then it is recognized as a part of GW
 Write back off expenditure and treating as IA is prohibited

13. Subsequent recognition
 It can be done either under:
 Cost model
 Revaluation model
 Cost model:
 Carried at cost less accumulated amortization and accumulated impairment
losses
 Impairment charge writing back is allowed

14. Subsequent recognition
 Revaluation model:
 Carried at revalued amount (fv) less subsequent accumulated
amortization and subsequent accumulated impairment losses
 Initial recognition is always at cost

15. Amortisation
 All intangibles have to categorized into assets having
indefinite or finite useful lives
 If it has finite useful life it is to be amortized over its
useful life
 Intangible assets having indefinite useful lives shall not
be amortized but tested for impairment every year
 Review of the lives of the assets should also be done in
each period as circumstances could change and its
effect may be on the useful lives

16. Research phase
 No IA is recognized from an expenditure incurred in the research phase
 In this phase an entity cannot demonstrate that an intangible asset exists that
will generate probable future economic benefits
 Research expenditure is recognized in P&L as and when incurred

17. Research phase
 Examples of research activities:
 (a) activities aimed at obtaining new knowledge;
 (b) the search for, evaluation and final selection of, applications of
research findings or other knowledge;
 (c) the search for alternatives for materials, devices, products,
processes, systems or services; and
 (d) the formulation, design, evaluation and final selection of
possible alternatives for new or improved materials, devices,
products, processes, systems or services

18. Development phase
 An intangible asset arising from development (or from the development phase
of an internal project) shall be recognised if, and only if, an entity can
demonstrate all of the following:
 (a) the technical feasibility of completing the intangible asset so that it will be
available for use or sale.
 (b) its intention to complete the intangible asset and use or sell it.
(c) its ability to use or sell the intangible asset.
 (d) how the intangible asset will generate probable future economic benefits.
 (e) the availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset.
 (f) its ability to measure reliably the expenditure attributable to the intangible
asset during its development

19. Development phase
 Examples of development activities:
 (a) the design, construction and testing of pre-production or pre-use
prototypes and models;
 (b) the design of tools, jigs, moulds and dies involving new technology;
 (c) the design, construction and operation of a pilot plant that is not of a
scale economically feasible for commercial production; and
 (d) the design, construction and testing of a chosen alternative for new or
improved materials, devices, products, processes, systems or services

20. Disclosures
 Paras 118 to 128 would apply
 Accounting policy disclosures
 P&L disclosures
 Disclosures in notes
 Balance sheet disclosures