IAS 38 Intangible Assets |

Complete detection of all IFRS 3 intangibles

Complete detection of all IFRS 3 intangibles explains it all, because detecting intangible assets can be a complex and challenging matter. Strategies to detect identifiable intangible assets vary depending on the facts and circumstances of the business combination and usually require a full review of the transaction. It is important to understand the business of the acquiree, what intangible resources it depends on and how these may translate into identifiable intangible assets. It should be possible to explain the acquired business in terms of the resources it uses to generate profits and how these are reflected in the acquiree’s assets and liabilities. In other words ask the question: what has been paid for?

Use the business case and transaction case … Read more

Impairment of intangible assets

Possible impairment of intangible assets has to be assessed on a periodical basis. Intangible assets are tested for impairment when there is indication that they might be impaired. Indicators of impairment include legal restrictions, business restructuring, development of new technology, economic changes, etc. Impairment of intangible assets

Impairment test for intangible assets is the same as that for a tangible fixed asset:

  1. comparing the carrying amount of the asset, and Impairment of intangible assets
  2. the higher of fair value (less cost to sell) and value in use. Impairment of intangible assets

If b) is lower than a) that difference is recognized as impairment. Impairment of intangible assets

Impairment test for goodwill is a little more complex. The goodwill is first … Read more

How is goodwill different from other intangible assets?

How is goodwill different from other intangible assets? An asset, which has no physical existence such as corporate intellectual properties (patents, trademarks, business methodologies and copyrights), trademarks, patents, software, goodwill and brand recognition are known to be an “Intangible asset”. So goodwill is and is not an intangible asset. Goodwill is a residual, unidentifiable, not separable asset. Intangibles are not that but…. How is goodwill different from other intangible assets

Separate identifiable intangible assets acquired

That is because identifiable intangible assets acquired in a business combination are recognised separately from goodwill [IFRS 3 B31]. An intangible asset is ‘identifiable’ if it arises from contractual or other legal rights or if it is separable [IAS 38 12]. Under certain criteria also … Read more

IAS 38 Non-contractual customer relationships

IAS 38 Non-contractual customer relationships, in Business Combinations, this is a intangible asset and is therefore recognised separately from goodwill, provided that its fair value can be measured reliably. This customer-related intangible asset does not arise from contractual or other legal rights, but meets the definition of an intangible asset because it is separable. IAS 38 Non-contractual customer relationships

IAS 38 Non-contractual customer relationships

If a customer relationship acquired in a business combination does not arise from a contract, the relationship is an intangible asset if it meets the separability criterion. Exchange transactions for the same asset or a similar asset provide evidence of separability of a non-contractual customer relationship and might also provide information about exchange prices that should be considered when estimating fair … Read more

History of intangible assets

In November 1983, the International Accounting Standards Committee (IASC) approved the International Accounting Standards IAS 22 ‘Accounting for Business Combinations’ that contained the principles for accounting for goodwill. IAS 22, being concerned with business combinations, does not define goodwill. It also does not address the issues of revaluation of goodwill as well as accounting for internally generated goodwill. For the purpose of improved international accounting standards (IASs), the IASC issued exposure draft (ED 32) “The Comparability of Financial Statements” in January 1989. ED 32 proposed amendments to IAS 22 as well as other IASs. The draft defined goodwill as the difference between the cost of acquisition and the fair values of net identifiable assets acquired. The draft proposed that positive … Read more