PowerPoint Presentation IAS 38 INTANGIBLE ASSETS Presented by March 8th, 2019 A team with passion of conquering INTANGIBLE ASSETS Objective and scope Definition Recognition and measurement Acquired in.
IAS 38 INTANGIBLE ASSETS Presented by : March 8th, 2019 INTANGIBLE ASSETS Objective and scope Definition Recognition and measurement Acquired intangible assets Internally generated intangibles Measurement after recognition Retirements and disposals Disclosures Objective and scope Objective Allow entities to Identify and Recognize separate value of intangible assets Enables users to Assess more Accurately the value and make up of assets of the entity Objective and scope Scope Definition of intangible asset Recognition and De-recognition as an asset Determine carrying amount Determination and treatment of impairment losses Disclosure requirement DEFINITION Having future economic benefits No physical substance With high degree of uncertainly concerning the future benefit Arises from the contractual and other legal rights Clearly distinguishable and controllable COMMON TYPE OF INTANGIBLE ASSETS Patent Goodwill Copyrights Intangible assets Trademarks Franchises Start-up costs Recognition Recognition An asset can recognize as an asset if Flow of probable future economic benefit into the entity Cost can be measured reliably Acquired Intangible Assets Acquired separately Purchase price, include import duties and non-refundable purchase taxes after deducting trade discounts and debates Directly attributable cost of preparing the asset for its intended use Acquired Intangible Assets Not include in cost: o Advertising, promotional activities o Training associated with new products, locations, customers o Administrative and other general overhead o Early stage operating losses Acquired Intangible Assets Example DAF Co purchased a quota for carbon emissions on 30 April,2017 in the following term: List cost $240,000 Import duty $15,000 non-refundable purchase taxes $5,000 Training cost $20,000 Delivery fees $7,000 In addition to the above information: DAF Co was granted a trade discount of 10% on the initial list price of the asset and a settlement discount of 5% if payment for the intangible asset was received within one month of purchase DAF Co paid for the plant on 25 May 2017 How should the above information be accounted for in the financial statements? Measurement after Recognition Revaluation model Assets are carried at fair value at the date of revaluation, less any subsequent accumulated amortization and less any subsequent accumulated impairment losses The asset value should be reviewed regularly The revaluation model is onlu available if an active market exists for that intangible asset Suck active markets are expected to be uncommon for intangible assets Measurement after Recognition Useful life of Intangible asset Useful life of an intangible assets can be applied in ways Intangible asset with a Finite useful life is amortized on a systematic basis over the best estimate of its useful life Intangible asset with an Infinite should be tested for impairment annually but not amortized Measurement after Recognition Finite lives Patents (20 years), copyrights (the life of the creator plus 70 years), franchise and license (the contractual life) The costs are subjected to amortization (a process of cost allocation) over the shorter of the legal or useful life, not to exceed 40 years Measurement after Recognition Amortization of Intangibles The impairment test needed only when events indicate that the book value may not be recoverable Amortization Method: Straight – line method Other method can be applied if it is more appropriate than the Straight-line method Residual value: Usually zero Entry Dr Amortization expense Cr Intangible Asset (or Accumulated Amortization) Measurement after Recognition Intangibles Assets with Infinite lives Trademarks, goodwill, in-process R&D The costs are not subject to amortization Impairment test is required at least annually Measurement after Recognition Useful life of Intangible assets Measurement after Recognition Example On 30 June, 2018 DAF.co carried out an impairment review of a brand that was carried in the SFP as at 31 Dec, 2017 at cost of $240,000 with accumulated amortization of $75,000 The brand had been estimated to have a year useful life and had been purchased on July, 2015 The review indicated that the brand had a value in use of $120,000 and a revised remaining useful life of years On the same day as the review results were given to the directors DAF.co received an offer of $130,000 from K16409 plc to purchase the brand In the SFP at 31 Dec,2018 what will be the carrying value of the brand? Measurement after Recognition Example Solution Carrying Value at 30 June,2018: $150,000 NRV: $130,000 Value in use: $120,000 Recoverable value: $130,000 Impairment loss: $20,000 ($150,000-$130,000) Amortization of $130,000 for six months with a four year life: $16,250 Carrying Value at 31 Dec, 2018= $130,000-$16,250=$113,750 Measurement after Recognition Example DAF Inc owns a freely transferable taxi operator’s license, which is acquired on July, 2017, at an initial cost of $24,000, The useful life of the license is years The entity uses the straight-line method to amortize the intangible At 31 Dec 2019, due to a government-permitted decrease in fixed taxi fares, the traded values of such a license was $12,000 The accumulated amortization on 31 Dec, 2019 is $10,000 Required: a) What journal entries are required at 31 Dec,2019? b) What would be carrying amount of IA after revaluation? Measurement after Recognition Example Solution: a) Dr Accumulated amortization $10,000 Cr Intangible Asset a/c $10,000 ( being eliminate of accumulated depreciation against the cost of the asset) Dr Revaluation Reserve a/c $2,000 Cr Intangible Asset a/c $2,000 ( being uplift of net book value to revalued amount) b) The net result is that asset has a revised carrying amount of $12,000 ( $24,000-$10,000-$2,000) Retirement and Disposals Gain or loss on derecognition Difference between carrying amount and net proceeds on disposal Recognize in P&L Disclosures General Separately between internally generated and those purchased Accounting policies and methods used Reconciliations between opening and ending balance Additional details about those judged to have indefinite lives Disclosures Internally generated Useful lives or amortisation rates Gross opening & closing balances Disclose separately Acquired Reconciliation of movements in year Also, R&D costs expensed in the period Re-valued intangibles Disclosures Intangible assets using RM For each class, the date of the revaluation, carrying amounts, carrying amounts if cost method had been used, methods and assumptions used to determine FV, reconciliations of revaluation surplus amounts, restrictions on distribution of revaluation surplus amounts THE END! The best thing you can that Try your best day by day! ... for that intangible asset Suck active markets are expected to be uncommon for intangible assets Measurement after Recognition Useful life of Intangible asset Useful life of an intangible assets. . .INTANGIBLE ASSETS Objective and scope Definition Recognition and measurement Acquired intangible assets Internally generated intangibles Measurement after... legal rights Clearly distinguishable and controllable COMMON TYPE OF INTANGIBLE ASSETS Patent Goodwill Copyrights Intangible assets Trademarks Franchises Start-up costs Recognition Recognition