Intangible assets

An intangible asset is 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. An
:asset is a resource
controlled by an enterprise as a result of past- 
.event
From which future economic benefits are - 
.expected to flow to the enterprise
AIS 38 requires an enterprise to recognise
: an intangible asset (at cost )if, and only if

a)- it is probable that the future economic (

benefits that are attributable to the
. asset will flow to the enterprise
b)- the cost of the asset can be measured (
. reliably
Recognition and Initial
Measurement of an
Intangible Asset
An intangible asset should be recognized if,
:and only if
a) it is probable that the future economic benefits that (
are attributable to the asset will follow to the
enterprise; and
.b) The cost of the asset can be measured reliably (
An enterprise should assess the probability of future
economic benefits using reasonable and supportable
assumption that represent management's best estimate
of the set of economic condition that will exist over the
. useful life of the asset
An intangible asset should be measured initially at
.cost
 Separate Acquisition
If an intangible asset is acquired separately, the cost of 
the intangible asset can usually be measured reliably.
This is particularly so when the purchase consideration is
.in the form of cash or other monetary assets
The cost of an intangible asset comprises its purchase 
price , including any import duties and non-refundable
purchase taxes , and any directly attributable
expenditure on preparing the asset for its intended
use .directly attributable expenditure includes , for
example , professional fees for legal services. Any trade
discounts and rebates are deducted in arriving at the
.cost
 Acquisition as part of a business
combination
Under IAS 22 (revised 1998) , business combination , if
an intangible asset is acquired in a business
combination that is an acquisition the cost of the
intangible asset is based on its fair value at the date of
.acquisition
Acquisition by way of a government grant
In some cases an intangible asset may be acquired
free of charge, or for nominal consideration, by way of
.a government grant
Fair value initially or a nominal amount-
Under IAS 20 accounting for government grants and
disclosure of government assistance an enterprise may
choose to recognize both the intangible asset and the
.grant at fair value initially
Exchanges of asset
An intangible asset may be acquired in exchange or part
exchange for a dissimilar intangible asset or other asset.
5the cost of such an item is measured at the fair value of
the asset received which is equivalent to the fair value of
the asset given up , adjusted by the amount of any cash
. or cash equivalents transferred
Internally generated goodwill
Internally generated goodwill should not be recognized
.as an asset
 Internally generated intangible
asset
It is sometimes difficult to assess whether an 
interlay generated intangible asset qualifies for
:recognition . it is often difficult to
a) identify whether ,and the point of time when ( 
there is an identifiable asset that will generated
.probable future economic benefits
. b) determine the cost of the asset reliably( 
To assess whether in internally generated 
intangible asset meets the criteria for recognition,
an enterprise classifies the generation of the asset
:into
.a) - a research phase( 
.b) – a development phase( 

Research phase 
No intangible asset arising from research ( or from 
the research phase of an internal project ) should
be recogniz000ed .expenditure on research (or on
the research phase of an internal project) should
. be recognized as an expense when it is incurred
 Development Phase
An intangible asset arising from development ( or from the
development phase of an internal project) should be recognized
:if and only if, an enterprise can demonstrate all of the following
the technical feasibility of completing the intangible asst so that-
; if will be available for use or sale
its intention to complete the intangible asset and use or sell it-
its ability to use or sell the intangible asset -
how the intangible asset will generate probable future -
. economic benefits
The availability of adequate technical, financial and other -
resources to complete the development and to use or sell the
intangible asset ; and
its ability to measure the expenditure attributable to the -
.intangible asset during its development reliably
 Cost of an Internally Generated
Intangible asset
The cost of an internally generated intangible 
asset is the sum of expenditure incurred from
the date when the intangible asset first meets
the recognition criteria
The cost of an internally generated intangible 
asset comprises all expenditure that can be
directly attributed, or allocated on a reasonable
and consistent basis, to creating, producing and
preparing the asst for its intended use. The cost
:includes, if applicable
a) -expenditure on materials and services used or(
;consumed in generating intangible asset
b) -the salaries, wages and other employment related(
costs of personnel directly engaged in generating the
;asset
c) - any expenditure that is directly attributed to(
generating the asset, such as fees to register a
legal right and the amortization of patents and
licenses that are user to generate the asset; and
d) - overheads that are necessary to generate the(
asset and that can be allocated on a reasonable and
.consistent basis to the asset
 Measurement Subsequent to
Initial Recognition
after initial recognition, an intangible asset should be. 
carried at its cost less any accumulated amortization and
.accumulated impairment losses
Allowed Alternative Treatment 
After initial recognition, an intangible asset should be. 
carried at a revalued amount, being its fair value at the
date of the revaluation less any subsequent accumulated
amortization and any subsequent accumulated impaired
losses. For the purpose of revaluations under this
standard, fair value should be determined by reference
to an active market. Revaluations should be made with
sufficient regularity such that the carrying amount that
which would be determined using fair value at the
.balance sheet date
If an intangible asset is revalued, all the other.
asses in its class should also be revalued, unless
.there is no active market for those assets

If an intangible asset in a class of revalued.

intangible assets cannot be revalued because there
is no active market for this asset, the asset should
be carried at its cost less any accumulated
.amortization and impairment losses
 Amortization
Amortization Period
The depreciable amount of an intangible asset be allocated on .
a systematic basis over the best estimate of its useful life. There
is a rebuttable presumption that the useful life of an intangible
asset will not exceed twenty years from the date when the asset
.is available for use
If control over the future economic benefits from an .
intangible asset is achieved through legal rights that have been
granted for a finite period, the useful life of the intangible asset
:should not exceed the period of the legal rights unless
a) the legal right are renewable; and(
.b) renewal is virtually certain(
 Amortization Method
The amortization method used should reflect the 
pattern in which the asset's economic benefits
are consumed by the enterprise. If that pattern
cannot be determined reliably, the straight-line
. method should be used
The amortization charge for each period should 
be recognized as an expense unless another
International Accounting Standard permits or
requires it to be included in the carrying amount
of another asset
 Residual Value
The residual value of an intangible asset . 
:should be assumed to be zero unless
a) there is a commitment by a third party to ( 
purchase the asset at the end of its useful life; or
:b) there is an active market for the asset and( 
i)- residual value can be determined by ( 
reference to that market; and
ii)- it is probable that such a market will exist ( 
. at the end of the asset's useful life
 Review of Amortization Period
and Amortization Method
the amortization period and the amortization method.
.should be reviewed at least at each financial year end
Recoverability of the Carrying Amount-
.Impairment Losses
to determine whether an intangible asset is impaired,.
an enterprise applies IAS 36, Impairment of Assets.
That Standard explains how an enterprise reviews the
carrying amount of its assets, how it determines the
recoverable amount of an asset and when it
.recognizes or reverses an impairment loss
 Retirements and Disposals
An intangible asset should be derecognized 
( eliminated from the balance sheet ) on disposal
or when no future economic benefits are
.expected from its use and subsequent disposal
Gains or losses arising from the retirement or. 
disposal of on intangible asset should be
determined as the difference between the net
disposed proceeds and the carrying amount of
the asset and should be recognized as income
.or expense in the income statement
 Disclosure
The financial statements should disclose the following for each
class of intangible assets, distinguishing between internally
:generated intangible assets
;a) the useful lives or the amortization rates used(
;b) the amortization methods used(
c) the gross carrying amount and the accumulated(
amortization (aggregated with accumulated impairment losses)
; at the beginning and end of the period
d) the line item ( s ) of the income statement in which the (
;amortization of intangible assets is included
e ) a reconciliation of the carrying amount at the beginning(
: and end of the period showing
additions , indicated separately those from internal) 1(
; development and through business combinations
;retirements and disposals ) 2(
increases or decreases during the period resulting from) 3(
revaluations under paragraphs 64, 76 and 77 and from
impairment losses recognized or reversed directly in equity
) ;under LAS 36 , impairment of assets ( if any
impairment loosed recognized in the income statement ) 4(
);during the period under LAS36 ( if any
impairment losses reversed in the income statement during ) 5(
;the period
net exchange differences arising on the translation of the ) 6(
financial statement of a foreign entity ; and
.other changes in the carrying amount during the period) 7(
,Comparative information is not required
amortization recognized during the period) – 8(