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1
Prepared by Nitin S Poojary
Liability Assets
Key Definitions
Disclosures
Ind AS v/s AS
The objective of IND AS 38 is to prescribe the
accounting treatment for intangible assets that are
not dealt with specifically in another IND AS.
The Standard requires an entity to recognise an
intangible asset if, and only if, certain criteria are
met.
The Standard also specifies how to measure the
carrying amount of intangible assets and requires
certain disclosures regarding intangible assets.
IND AS 38 applies to all intangible assets other than:
Financial assets
Exploration and evaluation assets (extractive industries)
Expenditure on the development and extraction of minerals,
oil, natural gas, and similar resources
Intangible assets arising from insurance contracts issued by
insurance companies
Intangible assets covered by another IND AS, such as:
Intangibles held for sale
Deferred tax assets
Lease assets
Assets arising from employee benefits plan
Goodwill acquired under business combination.
Agenda
Objective and Scope
Key Definitions
Disclosures
Ind AS v/s AS
Asset Intangible Asset
A resource controlled by the
entity as a result of past events, An identifiable non
From which future economic monetary asset
benefits are expected to flow to without physical
the entity
substance
Key Definitions
Disclosures
Ind AS v/s AS
Recognition criteria. IND AS 38 requires an entity to recognise an
intangible asset, whether purchased or self-created (at cost) if, and
only if:
a. It is probable that the future economic benefits that are attributable to the
asset will flow to the entity; and
b. The cost of the asset can be measured reliably.
An entity shall assess the probability of expected future economic
benefits using reasonable and supportable assumptions that
represent management’s best estimate of the set of economic
conditions that will exist over the useful life of the asset.
Separate acquisition
The probability criterion (a) is always considered to be satisfied.
The reliable measurement criterion (b) is usually satisfied.
If an intangible item does not meet both the definition of and the criteria for recognition as an intangible asset, IND AS 38
requires the expenditure on this item to be recognised as an expense when it is incurred.
Acquisition in a Internally
Separately
business generated
acquired
combination intangibles
Acquisition Expenditure
Cost equals
Cost incurred
fair value
in development
phase
Directly attributable expenditure on
Purchase price + import duties +
preparing the asset for its intended use
non-refundable purchase taxes -
e.g., employee benefits, professional fees,
trade discounts -rebates function testing
Separately Purchased
Cost includes
There is a presumption that the fair value (and
therefore the cost) of an intangible asset acquired in
a business combination can be measured reliably.
An expenditure (included in the cost of acquisition)
on an intangible item that does not meet both the
definition of and recognition criteria for an
intangible asset should form part of the amount
attributed to the goodwill recognised at the
acquisition date.
Charge all research cost to expense.
Development costs are capitalised when entity able to demonstrate :
Technical feasibility
Intention to complete the intangible asset and use or sell it
Ability to use or sell the intangible asset
How the intangible asset will generate probable future economic benefits
Adequate technical, financial and other resources to complete the
development
Ability to measure the expenditure attributable to the intangible asset
Subsequent
Initial Measurement
measurement
Revaluation
Cost Re-valued amt model not
permitted
(-)amortisation (-)amortisation in current AS
(-)Impairment (-)Impairment
Revaluation
Decrease in carrying
Increase in amount
carrying amount
Recognise to Other
Comprehensive Income Recognise to P&L
(Remaining increased value) (Remaining decreased
value)
Finite life Indefinite
life
Impairment test
Impairment if annually or When
required indication of
impairment
Indefinite does
not mean infinite
Present value of Intangible asset with finite useful
life is assumed to be zero unless
Commitment by third party to purchase the asset at the
end of its useful life.
Their is an active market for the asset-
Residual value can be determined
Such market will exist at the end of the asset’s useful life.
An asset is derecognised:
On disposal (e.g., sale or finance lease); or
When no future economic benefits are expected from its use or disposal
Recognise the consideration received at Fair value
Any gain or loss on de recognition – Recognise to P&L account
Amortisation not to stop unless when asset is no longer used unless :
It is fully depreciated or
Classified as held for sale
Agenda
Objective and Scope
Key Definitions
Disclosures
Ind AS v/s AS
For each class of intangible asset, disclose: [IAS 38.118 and 38.122]
useful life or amortisation rate
Amortisation method
Gross carrying amount
Accumulated amortisation and impairment losses
Line items in the income statement in which amortisation is included
Basis for determining that an intangible has an indefinite life
Description and carrying amount of individually material intangible
assets
Certain special disclosures about intangible assets acquired by way of
government grants
Information about intangible assets whose title is restricted
Contractual commitments to acquire intangible assets
Reconciliation of the carrying amount at the
beginning and the end of the period showing:
Additions (business combinations separately)
Assets held for sale
Retirements and other disposals
Revaluations
Impairments
Reversals of impairments
Amortisation
Foreign exchange differences
Other changes
Agenda
Objective and Scope
Key Definitions
Disclosures
Ind AS v/s AS
Sr. Ind AS 38 AS 26
No
1 Does not include any such exclusion specifically Does not apply to accounting issues of specialised
as these are covered by other accounting nature also arise in respect of accounting for discount
standards. or premium relating to borrowings and ancillary costs
incurred in connection with the arrangement of
borrowings, share issue expenses and discount allowed
on the issue of shares.
2 The requirement for the asset to be held for use Defines an intangible asset as an identifiable non-
in the production or supply of goods or services, monetary asset without physical substance held for use
for rental to others, or for administrative in the production or supply of goods or services, for
purposes has been removed from the definition rental to others, or for administrative purposes.
of an intangible asset.
3 Provides detailed guidance in respect of Does not define ‘identifiability’, but states that an
identifiability. intangible asset could be distinguished clearly from
goodwill if the asset was separable, but that
separability was not a necessary condition for
identifiability.
Sr. Ind AS 38 AS 26
No
6 Deals in detail in respect of intangible assets Refers only to intangible assets acquired in an
acquired in a business combination. amalgamation in the nature of purchase and does not
refer to business combinations as a whole.
Sr. Ind AS 38 AS 26
No
7 Gives guidance for the treatment of such Silent regarding the treatment of subsequent
expenditure expenditure on an in-process research and
development project acquired in a business
combination
8 Requires that if an intangible asset is acquired Requires the principles of existing AS 10 to be
in exchange of a non-monetary asset, it should followed which requires that when an asset is
be recognised at the fair value of the asset acquired in exchange for another asset, its cost is
given up unless (a) the exchange transaction usually determined by reference to the fair market
lacks commercial substance or (b) the fair value of the consideration given. It may be
value of neither the asset received nor the asset appropriate to consider also the fair market value of
given up is reliably measurable the asset acquired if this is more clearly evident. An
alternative accounting treatment to record the asset
acquired at the net book value of the asset given up; in
each case an adjustment is made for any balancing
receipt or payment of cash or other consideration also.
9 No Such requirement Also requires annual impairment testing of asset not
yet available for use.
Sr. Ind AS 38 AS 26
No
10 When intangible assets are acquired free Intangible assets acquired free of charge or for
of charge or for nominal consideration nominal consideration by way of government
by way of government grant, an entity grant is recognised at nominal value or at
should, in accordance with Ind AS 20, acquisition cost, as appropriate plus any
record both the grant and the intangible expenditure that is attributable to making the
asset at fair value asset ready for intended use.
11 The rebuttable presumption is not there Is based on the assumption that the useful life
in Ind AS 38. Ind AS 38 recognizes that of an intangible asset is always finite, and
the useful life of an intangible asset can includes a rebuttable presumption that the
even be indefinite subject to fulfilment of useful life cannot exceed ten years from the
certain conditions, in which case it date the asset is available for use
should not be amortised but should be
tested for impairment.
12 Guidance is available on cessation of There is no such guidance.
capitalisation of expenditure, de-
recognition of a part of an intangible
asset and useful life of a reacquired right
in a business combination.
Sr. Ind AS 38 AS 26
No
13 Permits an entity to choose either Revaluation model is not permitted.
the cost model or the revaluation
model as its accounting policy.
14 Acknowledges that the useful life of No such provision
an intangible asset arising from
contractual or legal rights may be
shorter than the legal life.
15 Change in the method of Change in the method of amortisation is a
amortisation is a change in change in accounting policy.
accounting estimate.
16 The residual value is reviewed at Specifically requires that the residual
least at each financial year-end. If it value is not subsequently increased for
increases to an amount equal to or changes in prices or value.
greater than the asset’s carrying
amount, amortisation charge is zero
unless the residual value
subsequently decreases to an amount
Agenda
Objective and Scope
Key Definitions
Disclosures
Ind AS v/s AS