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Necessary Condition For Control.: PAS 38 Intangible Assets

PAS 38 outlines the accounting requirements for intangible assets. It does not apply to certain assets including goodwill, financial assets, exploration and evaluation assets, and assets arising from employee benefits. An intangible asset must be identifiable, control future economic benefits, and have a cost that can be measured reliably to be recognized. Intangible assets can be acquired separately or through a business combination.

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124 views2 pages

Necessary Condition For Control.: PAS 38 Intangible Assets

PAS 38 outlines the accounting requirements for intangible assets. It does not apply to certain assets including goodwill, financial assets, exploration and evaluation assets, and assets arising from employee benefits. An intangible asset must be identifiable, control future economic benefits, and have a cost that can be measured reliably to be recognized. Intangible assets can be acquired separately or through a business combination.

Uploaded by

Emma Mariz Garcia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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PAS 38 Intangible Assets

PAS 38 does NOT apply to the following:


1. Goodwill acquired in business combination (PFRS 3)
2. Financial Assets (PFRS 9, PAS 32, and PFRS 7)
3. Right arising from exploration and evaluation assets (PFRS 6)
4. Expenditure on the development and extraction of non-regenerative resources
5. Intangible assets held for sale in the ordinary course of business (PAS 2)
6. Deferred taxes (PAS 12)
7. Leases (PAS 17)
8. Assets arising from employee benefits (PAS 17)
9. Deferred acquisition costs, & intangible assets, arising from an insurer’s
contractual rights under insurance contracts (PFRS 4)
10. Non-current intangible assets classified as held for sale (PFRS 5)

Intangible Assets
 An identifiable non-monetary asset without physical substance.
 Initially measured at COST

Essential Criteria of Intangible Assets


Identifiability Control
 Capable of being separated or divided  Has the power to obtain the future
from the entity. economic benefits
 Sold, transferred, licensed, rented or  Restrict the access of others to those
exchange either individually or together benefits.
with a related contract.  Legal enforceability of a right is not a
 Arises from contractual or other legal necessary condition for control.
rights.  Market & technical knowledge may give
rise to future economic benefits. An
Note: entity control those benefits
 It is unidentifiable if it cannot be  Employee’s Skills & specific managerial
sold, transferred, licensed, rented or or technical talent developed from
exchanged separately. training provided by the entity are NOT
recognized as intangible asset.
 Market share & customer loyalty are not
recognized as IA unless customer
relationships are protected by legal
rights or other ways of control.
Future Economic Benefits
 May include revenue from the sale of products or services, cost savings or other
benefits resulting from the use of the asset by the entity.

Intangible Assets may be Acquired through


Separate Acquisition Acquisition as Part of a Business
Cost comprises: Combination
1. Purchase price (import duties & non-
refundable taxes), after deducting trade  Cost is its FV at the acquisition date.
discounts & rebates
2. Any directly attributable cost of
preparing the asset for its intended
use.

Example of Directly attributable Costs:


1. Cost of employee benefits arising
directly from bringing the asset to its
working condition
2. Professional fees arising directly from
bringing the asset to it working
condition
3. Cost of testing whether the asset is
functioning property.

Cost NOT part of an IA:


a. Cost of introducing new product or
service (advertising & promotional
activities)
b. Cost of conducting business in a new
location or with a new class of customer
(cost of staff training)
c. Administration and other general OH
costs
d. Cost incurred while an asset capable of
operating in the manner intended by
management has yet to be brought into
use;
e. Initial operating losses (those incurred
PAS 38 Intangible Assets
while demand for the asset’s output
builds up)

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