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Intangible assets

Recognition and measurement

1.1 Definition

An intangible asset is an identifiable non-monetary asset without
physical substance.

1.2 Identifiable

In order to be identifiable the asset must either

 be separable – capable of being separately bought and sold, or

 arise from legal/contractual rights

1.3 Recognition

An intangible asset must

 meet the above definition

 generate a probable flow of economic benefit

 be capable of reliable measurement

1.4 Measurement

Purchased intangibles are initially measured at cost. Subsequently there is a choice
between:

 Cost model – cost less amortisation

 Revaluation model – revalued amount less amortisation

The revaluation model is rare in practice as its use demands the existence of an
active market. Active markets require:

 Homogeneous (identical) products

 Willing buyers and sellers

 Prices available to the public

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