This document defines intangible assets and provides guidance on their recognition, measurement, amortization and disclosure. Key points include: intangible assets lack physical substance but provide future economic benefits; recognition criteria are future benefits are probable and cost reliably measured; measurement depends on whether asset is internally generated or acquired; amortization period generally does not exceed 10 years; expenditures that maintain asset value are expensed while those that increase benefits are capitalized. Significant differences between Ind AS 38 and AS 26 are also outlined.

2. CONTENTS:
• DEFINITION
• RECOGNITION AND INITIAL MEASUREMENT OF INTANGIBLE ASSETS
• INITIAL AND SUBSEQUENT EXPENDITURE
• AMORTIZATION PERIOD
• RETIREMENTS AND DISPOSALS
• RELATED EXAMPLES
• SIGNIFICANT DIFFERENCES IN IND AS 38 AND AS 26

3. DEFINITION:
An Intangible Asset is an identifiable asset
with separate identity which is non-
monetary in nature that has no physical
substance, held for use in production or
supply of goods or services or for rentals to
others, etc.

4. RECOGNITION AND INITIAL MEASUREMENT OF
INTANGIBLE ASSETS
RECOGNITION CRITERIA:
• Future economic benefit should be expected to flow
to the enterprise
• Cost of the asset can be measured reliably.

5. INITIAL RECOGNITION
RECOGNITION
CRITERIA
MEASUREMENT
INTERNALLY
GENERATED
ACQUIRED
Goodwill, Trademark,
Copyright
Other intangible assets
Eg: patents
For cash Consideration
other than cash
will not be
recognized in
the books of
accounts
Which the
entity has
generated
on its own
The entity has
purchased it from
someone else
Research phase
expenditure
Development phase
Purchase price
+
DAC , Eg: duties & taxes,
documentation cost
till the asset is ready for
generating benefit
Capitalized ie, (+) cost
of the asset
Shall be
recorded as
expenses in
P&L a/c
Can be capitalized if:
there is certainty about FEB
Cost is reliably measurable
or
It should be expensed
FV of IA acquired
or
FV of asset given up
Which is more
clearly evident ,
will be recorded
in the balance
sheet

6. INITIAL AND SUBSEQUENT EXPENDITURE
• If subsequent expenditure incurred on intangible asset
increases the future economic benefit, then it can be
capitalized
↑ FEB → CAPITALISE
• If subsequent expenditure incurred on intangible assets
maintains the same future economic benefit, then it shall
expensed to profit/loss a/c
SAME FEB → EXPENSES TO PROFIT/LOSS A/C

7. AMORTIZATION PERIOD
Amortization should start when the asset
is available for use. The depreciable
amount of an intangible asset should be
allocated on the basis of useful life. This
AS adopts a presumption that the useful
life of intangible assets does not exceed
ten years. In some cases, it would be
longer than ten years

8. RETIREMENTS AND DISPOSALS
An intangible asset should be derecognized
on disposal or when no future economic
benefits are expected from its use, any gain
and loss (difference between the net
disposal proceeds and the carrying amount
of the asset) arising should be recognized as
income or expenses in statement of P & L.

9. RELATED EXAMPLE
An enterprise incurred costs to develop and produce a
software during 2017-18 as follows:-
Amount()
Completion of detailed programme and design 45,000
Coding and testing 30,000
Other coding costs 40,000
Testing costs 10,000
Product masters for training materials 15,000

10. What amount should be capitalized as software costs, on
Balance Sheet date ?
• As per AS 26,costs incurred in creating the software product
should be charged to research and development expense
when incurred until technological feasibility/asset recognition
criteria has been established, that criteria have been
established upon completion of detailed program design or
working model . In this case ,75000 would be recorded as an
expense(45000+30000)
• Cost incurred from the point of technological feasibility/
asset recognition criteria until the time when products costs
are incurred are capitalized as
software cost(40000+10000+15000)=65,000

11. SIGNIFICANT DIFFERENCES IN IND AS-38 AND AS-26
BASIS IND AS 38 AS 26
Definition The requirement of definition given by
AS 26 has been removed from the
definition
AS 26 defines an intangible asset as an
identifiable non-monetary asset
without physical substance held for
use in the production or supply of
goods or services, for rental to others,
or for administrative purposes
Separately
Acquired
Intangible
Assets
In this case, the criterion of probable
inflow of expected future economic
benefits is always considered satisfied,
even if there is any uncertainty
There is no such provision in AS 26
Revenue Based
Amortization
Method
Ind AS 38 allows use of revenue based
method of amortization of intangible
asset, in a limited way
AS 26 does not specifically deal that

12. BASIS IND AS 38 AS 26
Intangible assets acquired in
Business Combination
Ind AS 38 deals in detail in
respect of intangible assets
acquired in a business
combination
AS 26 refers only to intangible
assets acquired in an
amalgamation in the
nature of purchase
Subsequent Expenditure on in
Process Project
Ind AS 38 gives guidance for
the treatment of such
expenditure
AS 26 is silent regarding the
treatment of subsequent
expenditure
Intangible Assets Acquired in
Exchange
Ind AS 38 requires that if an
intangible asset is acquired in
exchange of a non-monetary
asset, it should be recognized
at the fair value of the asset
Principles of AS 10 to be
followed which require Fair
market value at the time of
consideration
Intangible Assets acquired
Free of Charge or for a
Nominal Consideration by
way of Government Grant
In that case an entity
should, record both the grant
and the intangible asset at fair
value
As per AS 26, intangible assets
is recognized at
nominal value or at
acquisition cost

13. BASIS IND AS 38 AS 26
Useful Life of an Intangible
Asset
Ind AS 38 does not define any
rebuttable presumption
AS 26 define rebuttable
presumption that the useful life
cannot exceed ten years from the
date the asset is available for use
Valuation Model as Accounting
Policy
It standard allow an entity to
choose either the cost or
revaluation model as its
accounting policy
Revaluation model is not
permitted under AS 26
Contractual or Legal Rights
may be Shorter than Legal Life
Ind AS 38 acknowledges that the
useful life of an intangible asset
maybe shorter than the legal life
AS 26 does not include such a
provision
Change in Method of
Amortization:
This change consider as a
accounting estimate
This change consider as a
accounting policy