Introduction and the Framework



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  • 14-4 In this chapter, flag icons identify area where there are GAAP differences between IFRS requirements and national standards.
  • Instructions
  • Access the website(s) identified on the inside back cover of this book, and prepare a concise summary of the differences that are flagged throughout the chapter material.
  • Copyright © 2010 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Inc., 111 River Street, Hoboken, NJ 07030-5774, (201) 748-6011, fax (201) 748-6008, website http://www.wiley.com/go/permissions. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.
  • Intangible Assets: IAS 38
  • Wiecek and Young
  • IFRS Primer
  • Chapter 15

Related standards

  • Intangible Assets
  • Related standards
  • IAS 38
  • Current GAAP comparisons
  • IFRS financial statement disclosures
  • Looking ahead
  • End-of-chapter practice

FAS 142 Goodwill and other intangible assets

  • Related Standards
  • FAS 142 Goodwill and other intangible assets
  • FAS 141 Business combinations
  • FAS 86 Accounting for the costs of computer software to be sold, leased, or otherwise marketed

IFRS 3 Business combinations

  • Related Standards
  • IFRS 3 Business combinations
  • IAS 36 Impairment of assets
  • IAS 17 Leases
  • IFRS 4 Insurance contracts
  • IFRS 5 Non-current assets held for sale and discontinued operations
  • IFRS 6 Exploration for and evaluation of mineral resources

Objective and scope

  • IAS 38 - Overview
  • Objective and scope
  • Recognition and measurement
  • Acquired intangible assets
  • Internally generated intangibles
  • Measurement after recognition
  • Retirements and disposals
  • Disclosures

Intangible asset:

  • IAS 38 – Objective and Scope
  • Intangible asset:
  • “an identifiable non-monetary asset without physical substance”
  • Conditions
  • Must be identifiable
  • Will provide future economic benefits
  • Benefits are controlled by the entity

Recognized as an intangible asset when:

  • IAS 38 – Recognition and Measurement
  • Recognized as an intangible asset when:
  • It is likely that the expected future economic benefits will be realized, and
  • The cost of the asset can be reliably measured
  • Measured initially at cost

Acquired separately:

  • IAS 38 – Acquired Intangible Assets
  • Acquired separately:
  • Cost includes purchase price, duties, non-refundable taxes, net of discounts and rebates + direct costs of preparing the asset and bringing it to an appropriate condition for its intended use.
  • Examples: franchises, patents, customer lists, trademarks

Not included in cost:

  • IAS 38 – Acquired Intangible Assets
  • Not included in cost:
  • Advertising, promotion, training associated with new products, locations, customers; administrative and other general overhead; early stage operating losses

Intangibles acquired in an asset exchange:

  • IAS 38 – Acquired Intangible Assets
  • Intangibles acquired in an asset exchange:
  • Cost = fair value (FV) of what is given up, UNLESS
  • Transaction does not have commercial substance, or
  • The FV of neither the asset given up or the asset acquired can be reliably measured
  • If (a) or (b), cost = carrying amount of asset(s) given up

Commercial substance exists if:

  • IAS 38 – Acquired Intangible Assets
  • Commercial substance exists if:
  • Future cash flows (amount, timing, risk) of asset received differ from those of asset given up; or
  • Entity-specific value has changed; and
  • The difference in (a) or (b) is significant when compared to the FVs of the assets exchanged.

Acquired in a business combination:

  • IAS 38 – Acquired Intangible Assets
  • Acquired in a business combination:
  • Cost is its FV
  • Identifiable intangibles are recognized separately from goodwill
  • Best FV is quoted market prices in an active market – if not available, other methods are used
  • IAS 38 Internally Generated Intangibles
  • Internally generated goodwill is not recognized as an asset
  • Because no identifiable resource has been created that is controlled by the entity and that can be measured reliably at cost

To recognize an internally generated intangible, it must:

  • IAS 38 Internally Generated Intangibles
  • To recognize an internally generated intangible, it must:
  • be an identifiable asset that will generate expected future economic benefits, and
  • have a cost that can be differentiated from ordinary operating costs and internally generated goodwill, and that can be measured reliably


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