[et_pb_section bb_built=”1″ admin_label=”Header – All Pages” transparent_background=”off” background_color=”#1e73be” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” custom_padding=”0px||0px|” next_background_color=”#000000″ custom_padding_tablet=”50px|0|50px|0″ custom_padding_last_edited=”on|desktop” global_module=”1221″][et_pb_row admin_label=”row” global_parent=”1221″ make_fullwidth=”off” use_custom_width=”off” width_unit=”on” use_custom_gutter=”off” custom_padding=”||5px|” allow_player_pause=”off” parallax=”off” parallax_method=”on” make_equal=”off” parallax_1=”off” parallax_method_1=”off” background_position=”top_left” background_repeat=”repeat” background_size=”initial”][et_pb_column type=”4_4″][et_pb_post_title global_parent=”1221″ title=”on” meta=”off” author=”on” date=”on” categories=”on” comments=”on” featured_image=”off” featured_placement=”below” parallax_effect=”on” parallax_method=”on” text_orientation=”left” text_color=”light” text_background=”off” text_bg_color=”rgba(255,255,255,0.9)” module_bg_color=”rgba(255,255,255,0)” use_border_color=”off” border_color=”#ffffff” border_style=”solid” custom_padding=”10px|||” parallax=”on” background_color=”rgba(255,255,255,0)” /][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section bb_built=”1″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” custom_padding=”30px||0px|” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” background_color=”#1e73be” prev_background_color=”#000000″ next_background_color=”#ffffff” custom_padding_tablet=”0px||0px|” global_module=”1228″][et_pb_row global_parent=”1228″ make_fullwidth=”off” use_custom_width=”off” width_unit=”on” use_custom_gutter=”off” custom_padding=”30px||0px|” allow_player_pause=”off” parallax=”off” parallax_method=”off” make_equal=”off” parallax_1=”off” parallax_method_1=”off” column_padding_mobile=”on” background_position=”top_left” background_repeat=”repeat” background_size=”initial”][et_pb_column type=”4_4″][et_pb_text global_parent=”1228″ background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid” background_position=”top_left” background_repeat=”repeat” background_size=”initial”]
[breadcrumb]
[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section bb_built=”1″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″ custom_padding_tablet=”0px||0px|” custom_padding_last_edited=”on|desktop” prev_background_color=”#1e73be” next_background_color=”#000000″][et_pb_row][et_pb_column type=”4_4″][et_pb_toggle admin_label=”Index” _builder_version=”3.0.98″ open=”off” title=”Index”]
Section 18: Intangible assets other than goodwill
18.2.1 Extract from FRS 102 Section 18.1 to 18.3.
18.2.2 OmniPro comment – Scope.
18.3.1 Extract from FRS 102 Section 18.4-18.7.
18.3.2.2 Examples of intangible assets:
18.3.2.3 Four situations where intangible assets arise.
18.4 Acquisition as part of a business combination – recognition, initial measurement.
18.4.1 Extract from FRS 102 Section 18.8 and 18.11.
18.4.2.1 Process for identifying intangibles in business contributions.
18.5 Separately acquired intangible assets – recognition, and initial measurement.
18.5.1 Extract from FRS 102 Section 18.10.
18.5.2.1 Examples of directly attributable costs.
18.6 Internally generated intangible assets – recognition and initial measurement.
18.6.1 Extract from FRS 102 Section 18.8A-18.8K, 18.17 and 18.10A-18.10B.
18.6.2.2 Developments Costs – Defined & Examples.
18.6.2.2.1 Policy Choice to capitalise or expense development costs.
18.6.2.2.2 Conditions for capitalisation of development costs.
18.6.2.2.3 Timing of capitalisation of development costs if conditions are met.
18.6.2.2.4 What development costs are permitted to be capitalised?.
18.6.2.2.5 Documentation to evidence that development costs met the criteria for capitalised.
18.6.2.2.6 When to cease capitalisation?.
18.7 Measurement after initial recognition.
18.7.1 Extract from FRS 102 Section 18.18-18.18H..
18.7.2.1 Accounting policy choice.
18.7.2.1.2.1 Why can the revelation model be applied?.
18.7.2.1.2.2 Frequency of revaluations.
18.7.2.1.2.3 Revaluation model applied – subsequently unable to determine fair value.
18.7.2.1.2.4 Revaluations and deferred tax.
18.8 Amortisation, useful life and residual value.
18.8.1 Extract from FRS 102 Section 18.19-18.24.
18.8.2.3 Useful economic life.
18.8.2.3.1 Factors to consider when assessing useful economic life.
18.8.2.3.2 Contractual rights, renewal option and useful economic life.
18.9 Impairments, retirements and disposals.
18.9.1 Extract from FRS 102 Section 18.25 and 18.26.
18.10.1 Extract from FRS 102 Section 18.27 and 18.29A..
18.10.2.1 Accounting policy extract.
18.10.2.1.1 Intangible asset accounting policy.
18.10.2.1.2 Goodwill accounting policy.
18.10.2.1.3 Research and development accounting policy.
18.10.2.2.1 Intangible fixed asset note
[/et_pb_toggle][/et_pb_column][/et_pb_row][et_pb_row][et_pb_column type=”3_4″][et_pb_text admin_label=”Main Body Text” text_orientation=”justified” use_border_color=”off” border_color_all=”off” module_alignment=”left” _builder_version=”3.17.6″]
18.3 Recognition
18.3.1 Extract from FRS 102 Section 18.4-18.7
General principle for recognising intangible assets
18.4 An entity shall apply the recognition criteria in paragraph 2.27 in determining whether to recognise an intangible asset. Therefore, the entity shall recognise an intangible asset as an asset if, and only if:
(a) it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
(b) the cost or value of the asset can be measured reliably.
18.5 An entity shall assess the probability of expected future economic benefits using reasonable and supportable assumptions that represent management’s best estimate of the economic conditions that will exist over the useful life of the asset.
18.6 An entity uses judgement to assess the degree of certainty attached to the flow of future economic benefits that are attributable to the use of the asset on the basis of the evidence available at the time of initial recognition, giving greater weight to external evidence.
18.7 The probability recognition criterion in paragraph 18.4(a) is always considered satisfied for intangible assets that are separately acquired.
18.3.2 OmniPro comment
18.3.2.1 Recognition
Section 18.4 to 18.7 of FRS 102 makes it clear that future economic benefits must be probable before and intangible can be recognised. The assessment is based on the certainty attached to future economic benefits to be derived from the assets at the time of initial recognition based on reasonable and supportable assumptions based on management’s best estimate. Probable means more likely than not in this particular case. Before any asset is recognised it must be probable future economic benefits will derive from it and the cost can be measured (Section 18.4 of FRS102). Website development costs for example would now likely meet the definition of an intangible as opposed to PPE. Where an intangible is separately acquired then it is always considered that future economic benefits will flow.
When looking at future economic benefits, the requirement that revenue will be generated from the intangible is not the only indicator, an intangible could have been developed which provide substantial cost savings for a company through a reduction in workforce. Such intangibles would meet the future economic benefit test for the recognition of an intangible.
Exchange transactions would provide evidence of future economic benefits. When assessing future economic benefits, external factors should be given higher importance.
18.3.2.2 Examples of intangible assets:
Example of intangibles include:
- Contract related intangibles i.e. Licencing agreements, franchises, service contracts, pub licenses, liquor licenses
- Market related intangibles i.e. trademarks, quota’s, market share and non-competition agreements.
- Technological related intangibles i.e. Computer software (see further detail above), patented technology
- Artistic related intangibles i.e. musical works etc.
18.3.2.3 Four situations where intangible assets arise
The section details the criteria for recognition and initial measurement of intangibles in five different instances as follows:
- Intangibles acquired in a business combination (Sections 18.4.2);
- Intangibles acquired by separate acquisition (Section 18.5.2);
- Intangibles acquired by exchange for other non-monetary assets:
- Intangibles acquired through developing the asset internally (Sections 18.6.2).
The criteria for recognition is applied differently in each of the above cases.
[/et_pb_text][/et_pb_column][et_pb_column type=”1_4″][et_pb_toggle _builder_version=”3.0.106″ title=”Practical Examples” open=”off”]
Examples
Example 1: Commencement of capitalisation.
Example 2: Allowable costs for capitalisation.
Example 3: Revising residual value of an asset.
Example 4: Change in accounting estimate.
[/et_pb_toggle][/et_pb_column][/et_pb_row][/et_pb_section]