A joint project of the Government Accountancy Sector and
Corporate Government Sector
Session 30
PAS 38 — Intangible Assets
IAS 38 PAS 38
PAS 38 – Intangible Assets Slide 2 of 55
Session Overview
Objective and Scope of IAS 38
Definition
Recognition
Measurement
Disclosure Requirements
PAS 38 – Intangible Assets Slide 3 of 55
LEARNING OBJECTIVE
Apply the concepts of PAS 38,
Intangible Assets, specifically on
the recognition, measurement, and
disclosure requirements.
PAS 38 – Intangible Assets Slide 4 of 55
To prescribe accounting
treatment for intangible assets
that are not dealt with
specifically in another
PFRSs/PASs.
PAS 38 – Intangible Assets Slide 5 of 55
Intangible assets that are within the scope of another
Standard
Financial assets
Exploration and evaluation assets
Expenditure on the development and extraction of
minerals, oil, natural gas and similar non-regenerative
resources
Intangible assets held by an entity for sale in the
ordinary course of business
Deferred tax assets
PAS 38 – Intangible Assets Slide 6 of 55
Lease assets
Assets arising from employee benefits
Goodwill acquired in a business
combination
Intangible assets arising from
insurance contracts
Non-current intangible assets classified
as held for sale
PAS 38 – Intangible Assets Slide 7 of 55
PAS 38 – Intangible Assets Slide 8 of 55
PAS 38 – Intangible Assets Slide 9 of 55
PAS 38 – Intangible Assets Slide 10 of 55
PAS 38 – Intangible Assets Slide 11 of 55
PAS 38 – Intangible Assets Slide 12 of 55
Controlled
by the
entity
With
future
economic
benefits
PAS 38 – Intangible Assets Slide 13 of 55
EXAMPLES OF INTANGIBLE ASSETS
PAS 38 – Intangible Assets Slide 14 of 55
ELEMENTS OF AN INTANGIBLE ASSETS
Identifiability
separable
arises from contractual or other legal right
Control
power to obtain the future economic
benefits flowing from the underlying
resource
power to restrict the access of others to
those benefits
PAS 38 – Intangible Assets Slide 15 of 55
ELEMENTS OF AN INTANGIBLE ASSETS
Future economic benefits
revenue from the sale of products or
services, cost savings, or other benefits
resulting from the use of the asset by the
entity.
PAS 38 – Intangible Assets Slide 16 of 55
RECOGNITION
Recognize intangible asset if:
it is probable that the future economic benefits
that are attributable to the asset will flow to the
entity; and
the cost of the asset can be measured reliably.
PAS 38 – Intangible Assets Slide 17 of 55
INITIAL MEASUREMENT
COST
PAS 38 – Intangible Assets Slide 18 of 55
ACQUISITION OF INTANGIBLE ASSET
Intangible assets may be acquired through:
Separate Purchase or Acquisition
Part of Business Combination
Government Grant
Exchanges of Assets
Internally Generated
PAS 38 – Intangible Assets Slide 19 of 55
INITIAL RECOGNITION - COST DETERMINATION
SEPARATE PURCHASE OR ACQUISITION
The cost includes:
Purchase price, including import duties and non-
refundable taxes, after deducting trade discounts and
rebates; and
Directly attributable cost of preparing the asset for its
intended use.
PAS 38 – Intangible Assets Slide 20 of 55
INITIAL RECOGNITION - COST DETERMINATION
ACQUISITION AS PART OF
BUSINESS COMBINATION
fair value at the date of acquisition
GOVERNMENT GRANT
Fair Value
Nominal amount or zero plus directly
attributable cost
PAS 38 – Intangible Assets Slide 21 of 55
INITIAL RECOGNITION - COST DETERMINATION
EXCHANGE OF ASSETS
fair value of the asset given up
fair value of the asset received
carrying amount of the asset given up
PAS 38 – Intangible Assets Slide 22 of 55
SELF-CREATION (INTERNAL
GENERATION)
RESEARCH
PHASE
DEVELOPMENT
PHASE
PAS 38 – Intangible Assets Slide 23 of 55
PAS 38 – Intangible Assets Slide 24 of 55
PAS 38 – Intangible Assets Slide 25 of 55
PAS 38 – Intangible Assets Slide 26 of 55
PAS 38 – Intangible Assets Slide 27 of 55
RESEARCH PHASE
If an entity cannot distinguish the research
phase from the development phase, the entity
treats the expenditure on that project as if it was
incurred in the research phase only
No intangible asset arising from research shall
be recognized.
Expenditure on research shall be recognized as
an expense when it is incurred.
PAS 38 – Intangible Assets Slide 28 of 55
PAS 38 – Intangible Assets Slide 29 of 55
PAS 38 – Intangible Assets Slide 30 of 55
PAS 38 – Intangible Assets Slide 31 of 55
PAS 38 – Intangible Assets Slide 32 of 55
PAS 38 – Intangible Assets Slide 33 of 55
PAS 38 – Intangible Assets Slide 34 of 55
PAS 38 – Intangible Assets Slide 35 of 55
PAS 38 – Intangible Assets Slide 36 of 55
PAS 38 – Intangible Assets Slide 37 of 55
PAS 38 – Intangible Assets Slide 38 of 55
PAS 38 – Intangible Assets Slide 39 of 55
PAS 38 – Intangible Assets Slide 40 of 55
PAS 38 – Intangible Assets Slide 41 of 55
PAS 38 – Intangible Assets Slide 42 of 55
PAS 38 – Intangible Assets Slide 43 of 55
PAS 38 – Intangible Assets Slide 44 of 55
PAS 38 – Intangible Assets Slide 45 of 55
Subsequent Recognition
(Measurement)
Choose either of
Cost Model Revaluation Model
Carrying Amount = Carrying Amount =
Cost Fair Value at the date of Revaluation
Less: Accumulated Amortization Less: Accumulated Amortization
Less: Accumulated Impairment Less: Accumulated Impairment
PAS 38 – Intangible Assets Slide 46 of 55
AMORTIZATION OF INTANGIBLE ASSETS
Finite Useful Life
Amortization method: Reflect the pattern in which the
economic benefits from the assets are consumed
If pattern cannot be determined reliably - Use SLM
Amortization expense =
Cost - Residual Value
Est. Useful Life
Residual value shall be presumed to be zero, except:
there is a commitment by a third party to purchase the
asset at the end of its useful life
there is an active market for the asset
PAS 38 – Intangible Assets Slide 47 of 55
AMORTIZATION OF INTANGIBLE ASSETS
Indefinite Useful Life
Shall not be amortized but are tested for
impairment annually and whenever there is an
indication that the intangible asset may be
impaired
IL = Recoverable amount < Carrying Amount
PAS 38 – Intangible Assets Slide 48 of 55
ILLUSTRATIVE ENTRY
An agency spent P5,000,000 in acquiring its new
software package from a supplier on January 2,
2016. Such software shall be installed and used to
speed up the agency’s operations. The useful life of
the software is determined to be 10 years and no
residual value was assigned to it.
a. To recognize the purchase of the accounting
software.
Computer Software 5,000,000
Cash in Bank- LCCA 5,000,000
PAS 38 – Intangible Assets Slide 49 of 55
ILLUSTRATIVE ENTRY CONTINUATION...
b. To recognize the amortization of the software at the end
of the first year
Amortization – Intangible Assets 500,000
(5,000,000/10 years)
Accumulated Amortization – 500,000
Computer Software
PAS 38 – Intangible Assets Slide 50 of 55
PAS 38 – Intangible Assets Slide 51 of 55
DERECOGNITION
PAS 38 – Intangible Assets Slide 52 of 55
DISCLOSURES
An entity shall disclose the following for each class of
intangible assets:
a) Whether the useful lives are indefinite or finite and, if
finite, the useful lives or the amortization rates used
b) Amortization methods used for intangible assets with
finite useful lives;
c) Gross carrying amount and any accumulated
amortization (aggregated with accumulated
impairment losses) at the beginning and end of the
period
PAS 38 – Intangible Assets Slide 53 of 55
DISCLOSURES
d) the line item(s) of the statement of
comprehensive income in which any
amortisation of intangible assets is included;
e) a reconciliation of the carrying amount at the
beginning and end of the period.
PAS 38 – Intangible Assets Slide 54 of 55
PAS 38 – Intangible Assets Slide 55 of 55