Intangible assets are defined as identifiable non-monetary assets that cannot not be seen, touched or physically measured, which are created through time and/or effort and that are identifiable as a separate asset. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today’s marketplace. Intangible assets have 3 critical attributes which are:
•Indetifiability. This means that they must be capable of being separated from the rest of the company and can be sold, licensed, rented or exchanged either individually or together with a related item or the intangible asset must be identifiable because it arises from contractual or legal rights even if those rights are not separable from the business. •Control. Intangible asset is a resource that is controlled by the entity as a result of past events (for example, purchase or self-creation) •Future economic benefits. Intangible asset is a resource from which future economic benefits (inflow of cash or other assets) are expected.
An intangible asset can be classified as either indefinite or definite depending on the specifics of that asset. A company brand name is considered to be an indefinite asset, as it stays with the company as long as the company continues operations. However, if a company enters a legal agreement to operate under another company’s patent, with no plans of extending the agreement, it would have a limited life and would be classified as a definite assets.
Accounting Requirements of IAS 38 Intangible Assets for Brands
The objective of this Standard is to prescribe the accounting treatment for intangible assets that are not dealt with specifically in another Standard. This Standard requires an entity to recognise an intangible asset if, and only if, specified criteria are met. The Standard also specifies how to measure the carrying amount of intangible assets and requires specified disclosures about intangible assets.
Recognition and measurement
The recognition of an item as an intangible asset requires an entity to demonstrate that the item meets: (a) the definition of an intangible asset; and
(b) the recognition criteria.
This requirement applies to costs incurred initially to acquire or internally generate an intangible asset and those incurred subsequently to add to, replace part of, or service it. An asset meets the identifiability criterion in the definition of an intangible asset when it: (a) is separable, it is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, asset or liability; or (b) arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.
An intangible asset shall be recognised if, and only if:
(a) it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and (b) the cost of the asset can be measured reliably.
An intangible asset shall be measured initially at cost.
Definition- brands: Intangible assets such as a product or company name, sign, symbol, or design that if operated in combination will lead to greater economic benefits from the manufacture and/or sale of a product or service through brand differentiation. From above the definition of brands, we can see brands should recognise as an intangible asset because they meet the definition of intangible asset and the recognition criteria.
Separately Acquired Intangible Assets
The cost of a separately acquired intangible asset comprises: (a) its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates; and (b) any directly attributable...