Page 22 - FINAL CFA I SLIDES JUNE 2019 DAY 8

Session Unit 8:

29. Long-lived Assets
LOS 29.b: Compare the financial reporting of the following types of intangible assets: purchased, internally

developed, acquired in a business combination. p. 211

Intangible assets are long-term assets that lack physical substance, such as patents, brand names, copyrights,
and franchises.

Identifiable intangible assets Unidentifiable intangible assets

Under IFRS: Cannot be purchased separately
• Separable from the firm or arise from a contractual or and may have an indefinite life
tanties
legal right, hence controlled by the firm (Trade Marks) (e.g. goodwill).
• Expected to provide future economic benefits.
• Cost must be reliably measurable

IFRS US GAAP (stricter as usual)

Intangible asset Created Internally • Expensed as incurred except for; • R & D expensed as incurred; however
• R/D – R expensed and D
capitalised • Cost of software for sale –R expensed
and D –capitalised.

• Initially recorded at cost, Type, e.g. franchise more • Initially recorded at cost,
Purchases Intangible Assets
typically fair value critical for a CFA though! typically fair value
Intangible Assets Obtained in
• Acquisition method: purchase price allocated to the identifiable Assets and
Business Combination Liabilities based on Fair Value and any excess is goodwill!