INTANGIBLE ASSETS (PAS 38) Intangible Assets with Definite Life

- Amortized over its UL

Intangible Assets - Tested for impairment
- Identifiable nonmonetary assets without o Whenever there is indication of
physical substance impairment

Essential Criteria: Intangible Assets with Indefinite Life

a. Identifiability - Not amortized
b. Control - Tested for impairment
c. Future Economic Benefit o At least annually

Measurement: Intangible Asset – Residual Value

Amortization =
Initial - at Cost Useful Life
Subsequent - Cost Model/ Revaluation
Model Amortization Expense xx
Intangible Asset xx
NOTE! Can only be carried at Revalued #
Amount if there is an active market for the
asset Derecognition of Intangible Asset
a. Disposal
b. No future economic benefits
Cost of Intangible Asset
1. Separate Acquisition Goodwill
a. Purchase Price - Most intangible of all intangible assets
b. Import duties and nonrefundable purchase - Developed/Internally generated GW
taxes o Not recognized as an asset
c. Direct costs - Purchased GW
o Recognized as an asset
2. Acquisition as part of Business Combination
- FV at date of acquisition Measurement of Goodwill
1. Residual Approach
3. Acquisition by Government Grant 2. Direct Approach
Initially recorded at either:
a. Fair Value
b. Nominal amount or Zero, plus direct PATENT
costs Patent
- Legal life of 20 years
4. Acquisition by Exchange - Technology-based intangible asset
a. With commercial substance:
FV of asset given-up + Cash Payments Cost of Patent
1. Acquired by Purchase
b. Without commercial substance: a. Purchase Price
CA of asset given-up + Cash Payments b. Import duties
c. Nonrefundable purchase taxes
5. Internally generated intangible asset d. Direct costs
- All directly attributable cost
2. Internally developed
Note! Internally generated brands, mastheads, • Licensing and other related legal fees
publishing titles, customer lists and items similar in
substance Note!
- Not an intangible asset • Research and Development Cost – Expense
- Components of internally generated • Cost of Litigation (prosecuting or defending a
goodwill patent)
- Expensed o Successful – Expensed
o Unsuccessful – Loss
Expenditures that does not meet the recognition
criteria Amortization of Patent
- Expensed
Examples: Legal Life
a. Start-up costs whichever is
or
b. Training costs SHORTER
Useful Life
c. Advertising and promotional costs
d. Business relocation/ recognition Competitive Patent (to protect the original patent)
costs - Amortized over the remaining life of the OLD
Patent
Subsequent Expenditures
- Expensed Related Patent (to extend the life of the old patent)
- Capitalized, if recognition criteria are met • Related Patent and Unamortized Cost of
OLD Patent
Classification of Intangible Assets o Amortized over the EXTENDED LIFE
a. Intangible Assets with Definite Life • If no extension of life:
b. Intangible Assets with Indefinite Life
 o New Patent – amortized over its own AIRLINE RIGHT
life
o Cost of Old Patent – amortized over - Route authority
the remainder of its life - Renewed every 5 years
- Indefinite UL
- No amortization
TRADEMARK/TRADENAME/BRANDNAME - Tested for impairment annually

- Market-related Intangible Asset

- Legal life of 10 years CUSTOMER LIST
o Maybe renewed for periods of 10
years each • Internally generated – Not an IA
o Indefinite UL • Acquired customer list – recognized as IA
- Not amortized o Amortized over its UL
- Tested for impairment at least annually o Tested for impairment

COPYRIGHT Origination cost - Expensed

Start-up cost - Expensed
- Artistic-related Intangible Asset Share Issuance Cost
- Amortized over its UL Charge to:
- Intellectual Property Code of the Philippines 1. Share Premium
o Term of protection for copyright 2. Retained Earnings
▪ During the life of the author
and for 50 years after death Web site development cost - Expensed

FRANCHISE
RESEARCH AND DEVELOPMENT COST
- Contract-based Intangible Asset
Definite Period: Research Phase
a. Amortization - To discover new knowledge
- Expensed
Useful Life
whichever is
or Development Phase
SHORTER
Definite Period - Application of research findings
- Expensed, or
b. Tested for impairment (if there is indication) - Capitalized (only if it complies with the
criteria)
Indefinite Period:
a. Not amortized Note! If cannot be distinguished as
b. Tested for impairment at least annually Research/Development phase
- Treated as Research Phase

LEASEHOLD IMPROVEMENT
Materials, Equipment and Intangible Asset
- Part of PPE a. Has no alternative future use – Expensed
- Depreciated b. Has alternative future use – Capitalized
• Charged to Expenses:
Lease Term i. Cost of Materials Used
whichever is ii. Depreciation of Equipment
or
SHORTER iii. Amortization of IA
Life of the Improvement

- Residual Value – Ignored

- Renewal Option: COMPUTER SOFTWARE
o Uncertain - Ignore • Cost incurred:
o Certain/Highly Probable – extension o Before technical feasibility - Expensed
is considered to determine the o After technical feasibility - Capitalized
extended lease term o Actual production of software – Inventory

• Amortized over its UL

BROADCASTING LICENSE • Tested for impairment
• Classification:
a. Finite UL o As a rule - IA
- Amortized over its UL o Purchased for resale - Inventory
- Tested for impairment o Integral part of a computer - PPE

b. Indefinite UL
- No amortization
- Tested for impairment at least
annually