Intangibale Assets (Expetions for IAS38)
Exeptions:
Goodwill aquired in a buisness combination (IAS 3 Buisness Combinations)
Intangible asstes arising under insurance contracts (IFRS 4 Insurance Contracts)
Intangible assets wihtin lease contracts (IFRS 16 Leases)
Characteristics of Intagible Assets
Identifiable
Lack of physical existence
Not monetary assets
Common types:
Patent
Copyright
Franchise or license
Trademark or trade name
Customer list
Goodwill
Indentifiablity (distinguishable from goodwill)
Seperable:
Item could (hypothetically) be tranferred to another party individually or in combination with another item (asset, contract or liability)
transferability only with whole enterprise is not sufficient
Existence of contractual or other legal rights, eg property interest that are only transferable by selling the whole entity
Control
power to obtain future economic benefits flowing from the underlying resource and to restrict the acces of others
standard case: Protection through enforcable legal rights
copyrights
confidentiality agreement with eployees
Exeption: e.g. secret know how not protected by patent
Negated control:
staff skills resulting from training
cutomer loyalty
Future economic benefits expected from resources
future revenues from sale or use of intangible asset
cost savings from use of intangible assets
additional criteria
non-monetary (exlusion of financial assets)
without physical substance (distinction from physical assets, i.e. PPE, inventory etc.) or primarily non-physical substance (e.g software, prototypes)
Recognition of intangible assets
Porbability of the inflow of future economic benefits
Reliable measurement of the asset’s costs
Internally Generated Intangibles
Research Activities:
original and planned investigation with the goal to reach new scientific or technological knowledge
Expample:
laboratory research for new knowledge, applications
Development Activities
updating a design, knowledge or a plan for the production of a new substantially improved materials, devices, products, process, systems or services before the start of commercial production or use
Example:
conceptual formulation and design of possible product or process alternatives; construction of prototypes and operation of pilot plans
R &D phases
Additional criteria in development phase:
Technical feasability of completing the asset
Intention to complete and use or sell asset
Ability to use or sell asset
Demonstration of how asset will generate future benefits
existence of a merket for sale
usefulness for internal use
Availability of adequate technical, financial and other resources from comoletion of project
buisness plan
financing agreement with bank
Ability to measure development costs reliably (existence of costing system)
Prohibition to recognize certain internally generated intagible values
generated brands
mastheads
publishing titles
customer lists and
items similar in substance
Prohibiton to recognize intangible values associated with
Training
Advertising
Start up activities
Inital Measurement of Intangiable Assets
Subsequent Measurement of Intag. Assets
Option according to IAS 38:
Cost model:
accumulated amortisation expenses
accumulated impairment losses
Revaluation Model (=fair value):
Cost Model
Type of Intangible:
limited- life intangibles
indefinite- life intangibles
Purchased:
Capitalize
Internally Ceated:
Over useful life
Do not amortized
Impairment Test:
Compare recoverable amount to carrying value
Amortization of limited-life intangibles
amortization by systematic charge to expense over useful life
useful life should reflect the periods over which the asset will contribute to cash flows
Amortization should be cost less residual value
asses the residual value and useful lives of intangibles assets at least annually
Amortization of indefinite- life Intangibles
no foreseeable limit on time the asset is expected to provide cash flow
no amortization
test indefinite- life intangibles for impairment at least annually
6 Categories of Intangibles
Marketing-related
Customer-related
Artistic- realted
Contract-related
Technology-related
No armotization
armortization
Reversal of Impairment Loss
assesment of whether impairment loss previously recongized ceased to exist or decreased = annual (IAS 36)
reversal of impairment loss if change in estimare of recoverable amount dure to increased estimated service potential
carrying amount is increased to newly estimated recoverable amount
Upper limit: carrying amount- amortization without impairment loss
reversal of imparment loss
cost model: gain
Revaluation model: revaluation increase (no income effect)
Revaluation model
fair value by reference to active market
uncommon for intangibles
Example: crypto
No recognition: internally generated (IAS 38)
recognition: Goodwill acquired in buisness combination (IFRS 3)
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