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Understanding Intangible Assets and Valuation

Intangible assets, defined by IFRS and US GAAP, are identifiable non-financial assets without physical substance, including goodwill, patents, and trademarks. They can be acquired or internally created, with all recorded at cost and subject to amortization or impairment tests based on their life span. Research costs are expensed, while development costs can be capitalized if they meet specific criteria and are amortized over a maximum of 15 years.

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8 views1 page

Understanding Intangible Assets and Valuation

Intangible assets, defined by IFRS and US GAAP, are identifiable non-financial assets without physical substance, including goodwill, patents, and trademarks. They can be acquired or internally created, with all recorded at cost and subject to amortization or impairment tests based on their life span. Research costs are expensed, while development costs can be capitalized if they meet specific criteria and are amortized over a maximum of 15 years.

Uploaded by

Tsonthi Dillah
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

INTANGIBLE ASSETS

Both IFRS (IAS 38) and US GAAP defines intangible asset as identifiable non-financial asset without
physical substance. E.g. Cash and Cash equivalents, marketable securities etc.
Intangible assets are grouped into Goodwill, Computer Software, Patent, Trademarks, franchise, etc.
Types of intangible Assets
1. Acquired – separate acquisition, by way of government grants, assets exchange
2. Internally created – goodwill, capitalization of research and development expenditure
Valuation of intangibles
All intangible assets are recorded and reported at cost.
Cost of intangible assets = Acquisition cost plus any other expenditure necessary to make the asset ready
for its intended use.
 Intangibles with limited life are subject to amortization (Debit Amortization expenditure and Credit
Intangible asset accumulated amortization)
 Intangibles with indefinite life are only subject to impairment test at least annually
 Goodwill is subject to impairment test annually.
Recognition of research and development costs
 All research phase expenditure is expensed in income statement
 Development expenditure is capitalized as an internally generated intangible asset only if it meets
strict criteria relating to technical feasibility and generation of future economic benefits
 Expenditure capitalized is amortized over its useful life on a straight line basis to a maximum of 15
years.

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