Intangible Assets (IAS38) – Key characteristics
Intangible Assets are similar to tangible assets as they contribute to the entity’s operations. However, Intangible assets IAS 38 are non-monetary assets without physical substance like other assets. Intangible assets can demonstrate special characteristics such as control and economic benefits.
Key Characteristics of intangible assets are
- Identifiability – An intangible asset must be identifiable to distinguish it from goodwill, i.e. it can be either separable or divided from the entity, licensed, rented or exchanged.
- Control – Intangible assets must be controlled by the entity, i.e. should have the power to obtain the future economic benefits flow to the entity.
- Future economic benefits – Entity must provide future economic benefits in many ways, such as Revenue from the sale of the products, cost-saving, etc.
Intangible assets may be acquired from other entities or can be generated internally. Initial cost recognition of intangible can be measured as follows:
Purchase Price (IAS 38) + directly attributable costs (IAS 38)
- Purchase Price includes
- Import duties & non-refundable purchase taxes
- Directly attributable costs include
- Costs of employee benefits (IAS 19) arising directly from bringing the assets to its working condition
- Professional fee arising directly from bringing the assets to working assets
- Cost of testing the asset.
Directly attributable costs exclude
- Cost of introducing a new product or services
- Cost of conducting business in the new location
- Administration & overhead costs
- Costs incurred while an asset capable of operating
- Initial operating Losses
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check our other blog about Why Intangible Assets (IAS38) matter?