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Note Buổi 7

The document discusses accounting for intangible assets under IAS 38. It defines intangible assets and outlines the accounting treatment for amortization. Research costs must be expensed when incurred, while development costs can be recognized as an asset if they meet certain criteria (PIRATE criteria). Development costs recognized as an asset must be amortized systematically and are subject to impairment testing. Financial statements must disclose accounting policies and details related to intangible assets.

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24 views3 pages

Note Buổi 7

The document discusses accounting for intangible assets under IAS 38. It defines intangible assets and outlines the accounting treatment for amortization. Research costs must be expensed when incurred, while development costs can be recognized as an asset if they meet certain criteria (PIRATE criteria). Development costs recognized as an asset must be amortized systematically and are subject to impairment testing. Financial statements must disclose accounting policies and details related to intangible assets.

Uploaded by

Long Chế Vũ Bảo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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IAS 38: Intangible non-current asset

1. Intangible asset

Intangible assets is an identifiable non-monetary asset without physical substance.

2. Accounting treatment

Debit Amortisation Account (Statement of Profit or Loss)

Credit Accumulated amortization account (Statement of Financial Position)

3. Research and development cost

Research:

· Activities aimed at obtaining new knowledge


· The search for applications of research findings or other knowledge
· The search for product or process alternatives
· The formulation and design of possible new or improved product or process alternatives.

Development:

· The design, construction and testing of pre-production prototypes and models.


· The design of tools, jigs, moulds and dies involving new technologies.
· The design, construction and operation of a pilot plant that is not of a scale economically
feasible for commercial production.
· The design, construction and testing of a chosen alternative for new/improved material
3.1. Research costs

Research costs should be recognized as an expense in the period in which they are incurred.

3.2. Development costs

Development expenditure must be recognized as an intangible asset if, and only if, the business can
demonstrate that all of the criteria in IAS 38 have been met (PIRATE)

P – How the intangible asset will generate Probable future economic benefits.

I - Its intention to complete the asset and use or sell it

R – The availability of adequate technical, financial and other Resources to complete the development
and to use or sale the intangible asset.

A – Its ability to use or sale the intangible asset

T – The technical feasibility of completing the intangible asset so that it will be available for use or sale

E – Its ability to measure reliably the Expenditure attributable to the intangible asset during its
development.

Note: The development costs of a project recognised as an asset should not exceed the amount that it is
probable will be recovered from related future economic benefits, after deducting further development
costs, related production costs, and selling and administrative costs directly incurred in marketing the
product.

4. Armotisation of development cost

Amortisation must be done on a systematic basis to reflect the pattern in which the related economic

benefits are recognised. If the pattern cannot be determined reliably, the straight-line method should
be used.

5. Impairment of development costs

If the intangible asset is considered to have an indefinite useful life, it should not be amortised but

should be subjected to an annual impairment review.

6. Disclosure requirement

The financial statements should also disclose the following.

(a) The financial statements should disclose the accounting policies for intangible assets that have

been adopted.

(b) For each class of intangible assets (including development costs), disclosure is required of the
following:

· The method of amortisation used


· The useful life of the assets or the amortisation rate used
· The gross carrying amount, the accumulated amortisation and the accumulated impairment
losses as at the beginning and the end of the period
· The carrying amount of internally generated intangible assets
· The line item(s) of the statement of profit or loss in which any amortisation of intangible assets
is included.
Accrual and prepayments

Accrued expenses (accruals) are expenses which relate to an accounting period but have not been paid
for. They are shown in the statement of financial position as a liability.

Prepaid expenses (prepayments) are expenses which have already been paid but relate to a future
accounting period. They are shown in the statement of financial position as an asset.

1. Difference between accruals and trade payables

Accruals generally represent liabilities to pay for goods or services that have been received in a period,
but that have not yet been invoiced for by the suppliers.

Trade payables are liabilities to pay for goods or services received in a period that have been invoiced
for by the suppliers.

2. Accounting treatment

Accrual: Prepayment:

Debit EXPENSE Debit ASSET

Credit LIABILITY Credit EXPENSE

Note: With all prepayments and accruals, the double entry will be reversed in the following period,
otherwise the organisation will charge itself twice for the same expense (accruals) or will never charge
itself (prepayments).

3. Unearned income

This is income the recipient has not yet earned and could be repayable.

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