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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
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18.5 Separately acquired intangible assets – recognition, and initial measurement
18.5.1 Extract from FRS 102 Section 18.10
18.10 The cost of a separately acquired intangible asset comprises:
(a) its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates; and
(b) any directly attributable cost of preparing the asset for its intended use.
18.5.2 OmniPro comment
As is evident from Section 18.10 of FRS102 the actual cost of the intangible should reflect its fair value at the date of acquisition which is in effect what was paid/payable for the intangible assuming it was purchased on an arm’s length basis including import duties and non-refundable taxes after trade discounts and rebates and directly attributable costs.
18.5.2.1 Examples of directly attributable costs
Section 18 does not provide examples of directly attributable costs, but examples would include:
- Professional fees arising directly from the acquisition in bringing it to its current condition;
- Cost of employees benefits arising from directly bringing the asset to its working condition;
- Cost of testing functionality of an asset where applicable.
- Costs which would not be seen as directly attributable would be; cost of advertising and promotional activities, costs in relation to staff training and any administrative overheads.
- Capitalisation should cease when the asset is ready for use and at that time amortisation should begin.
Example 1: Commencement of capitalisation
Company A purchased specialised software from a third party for CU600,000. The company incurred CU20,000 on tailoring to the company’s specific circumstances, CU10,000 in labour costs training staff on the software and a cost of CU2,000 on testing the new software.
In this example the total to be capitalised is the initial cost of CU600,000, the tailoring cost of CU20,000 and the CU2,000 on testing. The other costs are ignored as they are not directly attributable.
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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.
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