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INTANGIBLE ASSETS (lAS 38)
1. INTRODUCTION AND BACKGROUND
1.1
The purpose of this Standard is to prescribe the recognition and measurement criteria for in–
tangible assets that are not covered by other Standards. This Standard will enable users of financi al
statements to understand the extent of an entity's investment in such assets and the movements
therein.
1.2 The principal issues involved relate to the nature and recognition of intangible assets, deter–
mining their costs, and assess ing the amortization and impairment losses that need to be recog–
nized.
2. SCOPE
2.1 The Standard is to be applied in accounting for all intangible assets except
• Those that are within the scope of another Standard
• Financial assets as defined in lAS 39,
Financial Instrum ents: Recognition and Measurement
• Mineral rights and expenditure on the exploration for, or deve lopment and extraction of, min–
erals, oil, natural gas, and similar nonregenerative resources
2.2 The Standard does
not
apply to those intangible assets covered by other Standards, such as
• Intangible assets held for sale in the ordinary course of business (lAS 2)
• Deferred tax assets (lAS
12)
• Leases within the scope of lAS
17
• Assets arising from employee benefit plans (lAS 19)
• Financial assets covered by lAS 39, lAS 27, lAS 28, or lAS 31
• Goodwill acquired in a business combination (IFRS 3)
• Deferred acquisition costs and intangible assets arising from insurance contracts (IFRS 4)
(However, the disclosure requirement s for such intangible assets are applicable.)
• Noncurrent intangible assets classified as held for sale in accordance with IFRS 5.
2.3 In some cases, an intangible asset may be contained on or in a tangible item. Obvious exam–
ples are computer software, films, and licensing agreements. In such situations, judgment is re–
quired to determine which is the more significant element. In the case of a machine incorporating
software that cannot be opera ted without the software , the entire item would be treated as property,
plant, and equipment under lAS 16. However , add-in software on a computer, such as some forms
of report writing software or antivirus software, is not required for operating the tangible asset and
therefore would be accounted under lAS 38.
2.4 This Standard does apply to expenditure such as advertising , training, start-up costs, research
and development, patents, licensing, motion picture film, software, technical knowledge , fran–
chises, customer loyalty, market share, market knowledge, customer lists, and the like.
3. DEFINITIONS OF KEY TERMS (in accordance with lAS 38)
Intangible asset. An identifiabl e, nonmonetary asset without physical substance.
Asset. A resource controlled by an entity as a result of past events and from which future eco–
nomic benefits are expected to flow to the entity.
Research. Original and planned investigation undertaken with the prospect of gaining new
scientific or technical knowledge and understanding.
Development. The application of research findings or other knowledge to a plan or design for
the production of new or substantially improved materials, devices, products, processes, sys–
tems, or services before the start of commercial production or use.