Intangible Assets
Intangible Asset - Identifiable non-monetary asset without physical substance (e.g. copyrights, patents, goodwill, purchased brands and customer lists
Recording Intangible Assets
Historical Cost
Revaluation
Have to stick to one once chosen
Amortisation
Consumption of the benefits of intangible assets
Can be difficult to estimate useful life
Possibility of obsolescence
Changes in demand
Product life cycles
R&D
Research
Development
Early stages, not sure if it will be profitable
Expense in IS
Later stages, likely new product will generate profits
Intangible recorded in SFP - amortised
P - Probable future economic benefit
I - Intention to complete
R - Resources to complete
A - Able to use or sell
T - Technically feasible
E - Expenditure can be measured reliably
Movements disclosed in notes
IASB considering review to make statements more relevant and comparable
Borrowing Costs (IAS 23)
Directly attributable to bringing the asset into use
For capitalisation:
Against capitalisation:
Finance costs are part of the purchase decision
Follows matching principle
Better comparisonbetween companies because it is compulsory
Not comparable if one company borrows and the other does not
Finance costs only allocated up to the point where the asset usable
NCAs Held for Sale (IFRS 5)
Classification
Committed to selling
Immediately available for sale in current condition
Actively seeking a buyer
Marketed at a reasonable price
Measurement and Presentation
Lower of carrying amount and fair value less costs to sell
Show loss on reclassification if FV is lower
No more depreciation
Impairment
Carrying value exceeds recoverable value
Impairment test required if there are indicators of impairment
External
Internal
Decline in market value of asset
Obsolescence/physical damage to the asset
Adverse changes in economic environment
Decline in market capitalisation
Competitor actions
Changes to operations
Reorganisation
Loss of key employees
DR Impairment Loss / Revaluation Reserve
CR Asset
CGUs used to separate business into measureable units
Goodwill impaired before other intangibles because it is the most intangible