Judgement is needed to tell whether such intangible assets should be accounted for under IAS 38 or IAS 16. As mentioned earlier, IAS 38 provides application guidance for separate acquisition of intangible assets (IAS 38.25-32) and acquisition as part of a business combination (IAS 38.33-37). Currently studying for my AAT Level 4 Financial Statements exam, in a practice paper I have come across this question; "The directors of Wentworth plc are reviewing their assets under IAS 38, Intangible Assets. Road Map on IAS 38 1. answered Jan 10, 2016 in IAS 38 - Intangible Assets by Visio Level 5 Member … To prescribe the accounting treatment for intangible assets that are dealt with specifically in another Standard To specify how to measure … IAS 38 Intangible Assets prohibits the recognition of internally generated goodwill, thus any reversal of impairment is not recognised. ACCA FR Chapter 6 Intangible assets (IAS 38) Questions - Practice Questions - Chapter 6 Free ACCA Financial Reporting (FR) Tests. Impairment 9. The following statements about the provisions of IAS 38 may or may not be correct. Define an intangible asset. Under IAS 38.21, it puts down recognition criteria for intangible assets – An entity is required to recognise an intangible asset, whether purchased or self-created (at cost) if, and only if: It is probable that the future economic benefits that are attributable to the asset will flow to the entity; and – accounting for the different types of intangible asset acquired in a business combination; – the choice of accounting policy of cost or revaluation models, allowed under IAS 38 Intangible Assets for intangible assets; – the capitalisation of development expenditure. IAS 38 – Intangible Assets – was primarily issued in order to identify the criteria that need to be present before expenditure on intangible items can be recognised as an asset. An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. Hence $5 million needs to be charged to profit or loss to undo the reversal. The results of the survey will only be accessible by Deloitte and your personal details will not be disclosed. (i) No intangible asset arising from research shall be recognized. Also, explain how the criteria is applied to the recognition of separately purchased intangible assets, intangible assets acquired in a business combination and internally generated intangible assets. (6 marks). They acknowledged though that providing the context no longer answers the question after the conclusion in respect of service vs. asset has been reached. Useful life 6. It requires an entity to recognize an intangible asset upon fulfillment of certain recognition criteria. IAS 38 gives further guidance on all 3 aspects: Identifiability, Control, and ; Future economic benefits. Find out more about the benefits of membership and joining details. (8 marks) Required: Provide answers to the three queries raised by the chief executive officer. Earned Point(s): 0 of 0, (0) •You will have multiple attempts at the quiz. Students who practice questions generally learn more effectively than those who don’t. Students who practice questions generally learn more effectively than those who don’t. It specifies 2 recognition criteria: It is a resource controlled by the entity; and ; Future economic benefits are expected from the asset. It requires an entity to recognize an intangible asset upon fulfillment of certain recognition criteria. A long held principle of IAS 38 is that the majority of internally generated intangible assets cannot be capitalised. Standard IAS 38 Intangible assets gives answers to these questions and provides guidance on intangibles assets’ issues. ... Hello, I’ve a question regarding question 1 in this practice test (intangible assets ch.6). The results of the survey will only be accessible by Deloitte and your personal details will not be disclosed. A long held principle of IAS 38 is that the majority of internally generated intangible assets cannot be capitalised. Some intangible assets are contained in or on a physical substance. Intangible asset is an identifiable nonmonetary asset … An intangible asset with a finite useful life is tested for impairment annually. An intangible asset with an indefinite useful life is tested for impairment when indications exist An intangible asset is an identifiable non-monetary asset without physical substance. In your discussion, you are required to discuss IAS 38. Terms & Conditions is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless Your answers should refer to relevant provisions of International Financial Reporting Standards. If an asset incorporates both intangible and tangible elements, it shall be treated under __________. Total impairment is still $3 million. The standard also prescribes the subsequent accounting treatment of intangible assets that satisfy the recognition criteria and are recognised in the statement of financial position. INSTRUCTIONS: •Answer all questions on the quiz before submitting •A result of 8/10 is required in order to consider this complete. Find out more about the benefits of membership and joining details. Recognition of intangible assets. An asset is identifiable if either: it is separable (that is, it is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged); or it arises from contractual or legal rights. If you’re studying IAS 38 Intangible Assets, why not test your knowledge with our multiple choice quiz? Welcome to AccountantAnswer Forum, where you can ask questions and receive answers. Thus, when changes in circumstances indicate that the book value of the intangibles may not be reconcilable (i.e., fair value of intangible < carrying amount), a write-down should be performed to recognize the loss. Thank you for your time. We’d love to have you as a member; simply click here to find out more. E-mail: info@charterededucation.com. IAS 38 deals with many types of intangible assets including training costs, costs for advertising, start-ups, R&D and many more. It requires an entity to recognise an intangible asset if, and only if, specified criteria are met. 0 Essay(s) Pending (Possible Point(s): 0). An asset is identifiable if either: it is separable (that is, it is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged); or it arises from contractual or legal rights. And, IAS 38 expands this definition for intangible assets by specifying that on top of basic definition, an intangible asset is an identifiable non-monetary asset without physical substance. IAS 38 Intangible Assets outlines the accounting requirements for intangible assets, which are non-monetary assets which are without physical substance and identifiable (either being separable or arising from contractual or other legal rights). Provide answers to the issues raised by the managing director. The cost of a separately acquired intangible asset can usually be measured reliably (IAS 38.26). Results are being recorded. 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