i. In general, what is an intangible asset?
An intangible asset is an asset that does not have physical substance. Some examples include patents, copyrights, and goodwill.
ii. Which intangible assets appear on a company’s balance sheet under U.S. GAAP? Describe how U.S. GAAP determines whether an intangible asset is included in the balance sheet.
iii. Briefly describe how the accounting for intangibles differs under IFRS. To answer this question, you might use the Internet and search for IAS 38, the standard pertaining to intangible assets. In particular, explain the accounting for internally generated intangibles under IAS 38.
*****Internally developed intangibles are not recognized as assets under IAS 38 and IFRS. However, developments costs are capitalized with IFRS when technical and economic feasibility of a project can be demonstrated with specific criteria. Some of the criteria that needs to be met in order to recognize internally generated intangible asset are: demonstrating technical aspects, intent to sell the asset, and intent to complete the asset. Another difference is that revaluation to fair value is not allowed under GAAP, but it is under IFRS.
iv. In your opinion, which accounting treatment (GAAP or IFRS) provides more relevant disclosures about internally generated intangibles? Which treatment provides more reliable information?
I think that under IFRS, the information is more reliable because the intangibles can be revaluated to fair value. I think this is more important than being conservative, like GAAP encourages. Also, the ability to capitalize development costs is more relevant. However, it is important that the strict criteria should be met so that this ability would not get abused.
What does the value of goodwill on a balance sheet capture (that is, how does a company determine when and at what amount to record the value of goodwill)?
Goodwill exists when a company acquires another company, and the...
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