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(IAS38) are
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.
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:
An 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?