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Chapter 30 I Intangible Assets (lAS 38)
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Cost. The amount paid or fair value of other consideration given to acquire or construct an
asset.
Useful life. The period over which an asset is expected to be utilized, or the number of pro–
duction units expected to be obtained from the use of the asse t.
Residual value of an asset. The estimated amount, less estimated disposal costs, that could be
currently realized from the asset's disposal if the asset were already of an age and condition
expected at the end of its useful life.
Depreciable amount. The cost of an asset less its residual value.
Depreciation. The systema tic allocation of the depreciable amount of an asset over its ex–
pected useful life.
Fair value. The amount for which an asset could be exchanged between knowledgeable,
willing parties in an arm' s-length transaction.
4. ELABORATION AND INTERPRETATION OF THE DEFINITIONS
4.1 Identifiability
In order to meet the definition of an intangible asset, expenditure on an item must be separate ly
identifiable in order to distinguish it from goodwill. An asset meets the identifiability criterion
when it
• Is capable of being separated from the entity and sold, transferred, licensed, or rented either
individually or in combination with a related contract, asset, or liabilit y;
or
• Arises from contractual or other legal rights, regardless of whether those rights are transfer-
able or separable from the entity or other rights or obliga tions.
4.2 Contr ol
4.2.1 An entity controls an asset if it has the power to obtain the future economic benefits flowing
from the underlying resource and to restrict the access of others to those benefits. Usually this con–
trol would flow from legally enforceable rights. However, legal enforceability is not necessary if
control can be enforced in some other way. For example, one method of control is keeping some–
thing secret through employee confide ntiality.
4.2.2 Control needs to be looked at carefully. An entity may be able to identify skills in its work–
force and to measure the costs of providing those skills to its staff (via training). However, the en–
tity usually does not have control over the expected economic benefits arising from the skilled
staff, as they can leave their employment. Even if the skills are protected in some way such that
departing staff are not permitted to use them elsewhere, the entity has lost the future benefit of the
skills imbued in the departing staff member.
4.2.3 Similarly, the purchase of customer lists or expenditure on advertising, while identifiab le,
does not provide control to an entity over the expected future benefits. Customers are not forced to
buy from the entity and can go elsewhere.
4.3 Future Economic Benefit
Future economic benefit may include revenue from the sale of products, services, or processes, but
also includes cost savings or other benefits from use of an asset. Use of intellectual property can
reduce operating costs rather than produce revenue.
S. RECOGNITION AND MEASUREMENT
5.1 An item may be recognized as an intangible asset when it meets the definition of an intangi–
ble asset (see above) and meets these recognition criteria:
• It is probable that the expected future economic benefits that are attributable to the asset will
flow to the entity;
and
• The cost of the asset can be measured reliably.