INTANGIBLE ASSETS

PAS 38
 INTANGIBLE ASSET

• An identifiable nonmonetary asset without physical substance

• It is controlled by the entity as a result of past event and from

which future economic benefits are expected to flow to the
entity.

THREE ESSENTIAL CRITERIA:

1. Identifiability
2. Control
3. Future economic benefits
 RECOGNITION

Intangible assets shall be measured initially at cost.

Subsequent measurement:

1. COST MODEL – cost less any accumulated amortization and any

accumulated impairment loss

2. REVALUATION MODEL – revalued amount less any subsequent

amortization and any subsequent accumulated impairment loss.

Note: Revaluation model can only be used if there is an active market for the asset.
DIFFERENT MEANS OF ACQUIRING INTANGIBLE ASSET

1. SEPARATE ACQUISITION – the cost of the intangible asset comprises:

a. the purchase price
b. import duties and nonrefundable purchase taxes, and
c. directly attributable cost

2. ACQUISITION AS PART OF A BUSINESS COMBINATION – the cost of

intangible asset is based on the fair value on the date of acquisition
 DIFFERENT MEANS OF ACQUIRING INTANGIBLE ASSET
3. ACQUISITION BY WAY OF A GOVERNMENT GRANT – cost of intangible asset
is either:
a. Fair value
b. Nominal amount or zero, plus any directly attributable expenditures

4. ACQUISITION BY EXCHANGE – cost of intangible asset is measured at fair value

of asset given up plus any cash payment (if with commercial substance)
If without commercial substance, carrying amount of asset given up plus any cash
payment
 DIFFERENT MEANS OF ACQUIRING INTANGIBLE ASSET

5. INTERNALLY GENERATED INTANGIBLE ASSET – cost of intangible asset

includes all directly attributable costs necessary to create, produce and prepare the
asset
However, internally generated brands, mastheads, publishing titles, customer
lists and items similar in substance shall not be recognized as intangible assets, but
are expensed when incurred.
CLASSIFICATION OF INTANGIBLE ASSETS

1. Intangible assets with definite life

Examples: patent, copyright, franchise with fixed term, computer

software, customer list, and license

2. Intangible assets with indefinite life

Examples: goodwill, trademark, and perpetual franchise

• AMORTIZATION – the systematic allocation of the amortizable amount of an
intangible asset over the useful life
• AMORTIZABLE AMOUNT – cost of intangible asset less residual value
• RESIDUAL VALUE of an intangible asset – presumed to be zero, except:

a. when a third party is committed to buy the intangible asset at the end of
useful life
b. when there is an active market for the intangible asset that the residual
value can be measured reliably
AMORTIZATION AND IMPAIRMENT OF INTANGIBLE ASSETS

Intangible assets with limited or finite life are amortized over their useful life. They
are also tested for impairment whenever there is an indication of impairment at the end of
the reporting period.

Intangible assets with indefinite life are not amortized but are tested for
impairment at least annually and whenever there is an indication that the intangible asset
may be impaired,
 PATENT

• An exclusive right granted by the government to an inventor enabling the grantee to

control the manufacture, sale or other use of invention for a specified period of time.
• It is regarded as technology-based intangible, with a legal life of 20 years from the
date of filing the application.
• Its life can be extended beyond its legal life by a new patent for
improvements/changes.

This is in accordance with R.A. No. 8293 or the Intellectual Property Code of the Philippines.
 PATENT

• Cost of patent includes purchase price, import duties, non refundable purchase
taxes and any directly attributable cost.
• For internally developed, the cost includes cost of licensing and other related legal
fees in securing the patent rights.
• All research and development costs are expensed.
• Cost to defend a patent, successful or not are also expensed immediately by
virtue of recognition criteria for subsequent costs capitalization.
 AMORTIZATION OF PATENT

• Patent shall be amortized over its legal life or useful life whichever is shorter.
• If a competing patent is acquired in protection of the original patent, its cost shall be
amortized over the remaining useful life of the old patent.
• For a related patent that is acquired, the cost of which and the unamortized cost of
the old patent is to be amortized over the extended life. If there is no extension, cost
of old and related patent is amortized over their remaining useful life.
EXAMPLE 1
An entity developed a patent for 800,000 and spent 480,000 for the licensing of the patent
including legal fees and cost of models and drawings that accompany the registration on
January 1, year 1. The patent will be useful for the entire legal life of 20 years.
On January 1, year 3, the entity paid 720,000 to attorneys for the services in connection
with a successful defense of the patent.
On January 1, year 4, the entity purchased a competing patent for 680,000 in order to
protect the original patent. The competing patent has 18 years to run from the date of
acquisition.
On December 31, year 4, the product covered by the patent was withdrawn from sale
under a government order because of potential hazard in the product.
EXAMPLE 1 journal entries
To record development of patent
Research and Dev’t expense 800,000
Cash 800,000

To record the cost of licensing of patent

Patent 480,000
Cash 480,000

To record amortization of patent for year 1

Amortization of patent (480T/20) 24,000
Patent 24,000

To record amortization of patent for year 2

Amortization of patent 24,000
Patent 24,000
EXAMPLE 1 journal entries cont.
To record cost of successful defense of patent in year 3
Legal expenses 720,000
Cash 720,000

To record amortization of patent for year 3

Amortization of patent 24,000
Patent 24,000

To record acquisition of competing patent

Patent 680,000
Cash 680,000

To record amortization of patent for year 4

Amortization of patent 64,000
Patent 64,000

To write-off patent account in year 4

Patent written off 1,024,000
Patent 1,024,000
 TRADEMARK

• Is a symbol, sign, slogan or name used to mark a product to distinguish it

from other products.
• It is a market-related intangible asset
• Its legal life is 10 years and renewable for periods of 10 years each. Hence,
trademark is regarded as having indefinite life.
GOODWILL
 COPYRIGHT

• An exclusive right granted by the government to the author, composer or

artist enabling the grantee to publish, sell, or otherwise benefit from the
literary, musical, or artistic work.
• It is a artistic-related intangible asset
• The term of protection for copyright is during the life of the author and for
50 years after death.
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ALL THE TIPS YOU
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Mercury is the closest planet to the Sun and
the smallest one in the Solar System—it’s
only a bit larger than the Moon. The planet’s
name has nothing to do with the liquid

INTRODUCTION
metal, since Mercury was named after the
Roman messenger god
01
THEORY
LESSON
You could enter a subtitle here if you
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 96.80%
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 WORKSHOP EVOLUTION
To modify this graph, click on it, follow the link, change the data
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Jupiter
Jupiter is a gas giant and the
biggest planet in the Solar
System
WHAT IS THIS TOPIC ABOUT?
Venus Mars
Venus has a beautiful Despite being red, Mars is a
name and is the second cold place full of iron oxide
planet from the Sun dust
Jupiter is a gas giant and the
biggest planet in the Solar System

FEATURES OF THE TOPIC

● Here you can talk about the features
of the topic

● Here you can talk about the features

of the topic

● Here you can talk about the features

of the topic

● Here you can talk about the features

of the topic
A PICTURE IS
WORTH A
THOUSAND
WORDS
 MARS VENUS
Despite being red, Mars is actually Venus has a beautiful
a cold place full of iron oxide dust name and is the second
planet from the Sun

JUPITER SATURN

EXAMPLES
Jupiter is a gas giant and the Saturn is a gas giant, composed
biggest planet in the Solar System mostly of hydrogen and helium
 WEEK 1 WEEK 2 WEEK 3

Mercury is the Saturn is the ringed Jupiter is the

LESSON
smallest one one biggest one

Venus has a Mars is a Neptune is the

EXERCISE
beautiful name cold place farthest from us

CONTENTS
Earth is where we Pluto is now a Ceres is in the
PRACTICE
live on dwarf planet asteroid belt
Mercury
Saturn

OUR WORKSHOP WORLDWIDE

 LESSON 1
Mercury is the closest
planet to the Sun

LESSON 5 LESSON 2

WORKSHOP LESSONS
Venus is the second planet Saturn is composed of
from the Sun hydrogen and helium

LESSON 4 LESSON 3
Despite being red, Mars is Jupiter is the biggest planet
a cold place of them all
 January March May

LESSON 2 LESSON 4
Saturn is the Mars is actually
ringed one cold

CALENDAR
LESSON 1 LESSON 3 LESSON 5

Mercury is the Saturn has several Earth is where we

smallest one rings live on

February April
 MERCURY JUPITER MARS
Mercury is the closest It’s the biggest planet in the Despite being red, Mars is
planet to the Sun

RECOMMENDATIONS
Solar System a cold place

SATURN NEPTUNE VENUS

Saturn is composed of It’s the farthest planet from Venus is the second planet
hydrogen and helium the Sun from the Sun
Mercury is the closest planet to the

PRACTICAL EXERCISE
Sun and the smallest one in the
Solar System—it’s only a bit larger
than our Moon. The planet’s name
has nothing to do with the liquid
metal, since Mercury was named
after the Roman messenger god
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