INDIAN ACCOUNTING STANDARD 38 - PowerPoint Presentation

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INDIAN ACCOUNTING STANDARD 38

Intangible assets

Damania & Varaiya

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Intangible Assets Definition

An intangible asset is

An identifiable

Non monetary asset

Without physical substance

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Identifiability

Capable of being separated/divided from entity and sold/transferred; orContractual or legal right

Lack of physical substance

Cannot

be seen or touched

Where

tangible and intangible asset is inseparable, judgement is required to determine which element is more significantSlide3

Scope

Recognition & Initial Measurement

Subsequent MeasurementUseful life, amortisation and impairmentRetirement and Disposal

Disclosure

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Recognition

Meets definition of Intangible Asset

Probable future economic benefits i.e. more likely than notCosts can be measured reliably

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Initial Measurement

All intangible assets shall be measured initially at cost

The ascertainment of cost of intangible will depend on its mode of acquisition:Separate acquisition

Business combination

Internally generated

Exchange of non monetary asset

Government grant

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Self acquired intangible assets

Cost includes

Add Purchase Cost & directly attributable expenditure on preparing asset for its intended

use

Import Duties

Non refundable purchase taxesLess

Trade discounts and rebates Implicit interest in deferred payment

Damania & Varaiya6Cost does not include:Cost of introducing new product or service, costs of conducting business in a new location or with new class of consumers and general overhead costsSlide7

Research and development

Treat research expenditure as revenue

expenditure

Capitalise development phase expenditure if

recognition criteria fulfilled. Otherwise treat as

revenue expenditure

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Subsequent Expenditure

Any subsequent expenditure should be capitalised only when original recognition criteria is satisfied.

Expenditure not eligible for capitalisation shall be expensed out

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Subsequent Measurement

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Cost Model

At cost

less

Any amortisation

less Impairment losses.

Revaluation ModelFair value less Any amortisationless

Impairment lossesSlide10

Amortisation and impairment

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Retirement and Disposals

An entity shall de-recognise PPE

on disposal or

when no future economic benefits are expected from its use or disposal.

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Disclosures

For each class of intangible asset distinguishing internally generated and other intangibles:

Whether useful lives are definite or indefinite

Useful lives or amortisation rate and method used

Gross carrying amount and accumulated amortisation at the beginning and at the end of the period

Reconciliation of carrying amount at the beginning and at the end of the period

Amount of R & D expensed out

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Major differences between IND AS 38 and AS 28

AS 28

Only cost model is available

There is rebuttable presumption that useful life will not exceed 10 years

Goodwill arising on amortisation is amortised over period of 5 years. Goodwill arising on consolidation is not amortised but tested for impairment

IND

AS

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8An entity can choose between cost model and revaluation modelUseful life of assets can be finite or indefiniteGoodwill having an indefinite useful life is not amortised and tested for impairment annually or whenever there is indicationDamania & Varaiya13Slide14

THANK YOU

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