Page 109 - Microsoft Word - 00 - Prelims.docx

Intangible assets

Intangible assets

1.1 Overview

IAS 38 Intangible Assets defines an intangible asset as 'an identifiable non-
monetary asset without physical substance' (IAS 38, para 8).

 Intangible assets can be purchased or internally generated, e.g. brand names.

 As a general rule, purchased intangible assets are capitalised whereas
internally generated intangible assets are not recognised in the financial
statements.

 When the cost and expected useful life of an intangible asset can be reliably
measured, they must be amortised to reflect the using up or wearing out of that
asset.

 If the expected useful life cannot be reliably estimated, the intangible asset is
subject to an annual impairment review, rather than an annual amortisation
charge.

 Examples of intangible assets include: goodwill, development costs, brands,
copyrights, licences and trademarks.

In effect, amortisation is really the same as depreciation but a term
used in relation to intangible assets.

103