(Summary) Ind AS 38

Intangible Assets

Is to prescribe the accounting treatment for intangible assets that are not dealt with specifically in another Ind AS. The Standard requires an entity to recognise an intangible asset if, and only if, certain criteria are met. The Standard also specifies how to measure the carrying amount of intangible assets and requires certain disclosures regarding intangible assets.

Applies to all intangible assets except:

  • Financial instruments
  • Exploration and evaluation assets
  • Expenditure on the development and extraction of minerals, oil, natural gas, and similar resources
  • Insurance contracts
  • Intangible assets covered by another Ind AS.
  1. Intangible asset
  2. Impairment loss
  3. Amortization
  4. Research
  5. Residual value
  6. Useful life

Intangible asset: An identifiable non-monetary asset without physical substance

Monetary assets: Money held and assets to be received in fixed or determinable amounts of money.

Recognition criteria.

Recognise an intangible asset (at cost) if, and only if:

  • The cost of the asset can be measured reliably.
  • It is probable that the future economic benefits that are attributable to the asset will flow to the entity; and

Business combinations.

Cost of IA which is acquired in a Business Combination is treated as fair value at the acquisition date. If an asset acquired in a business combination is separable or arises from contractual or other legal rights, sufficient information exists to measure reliably the fair value of the asset.

Cost of Intangible asset is treated as Fair value at acquisition date. 


The Standard also prohibits an entity from subsequently reinstating as an intangible asset, at a later date, an expenditure that was originally charged to expense.

  • Charge all research cost to expense.
  • Development costs are capitalised only if all of the following pointers are demonstrated by the entity:
    • Technical and commercial feasibility of the asset for sale or use have been established
    • Intention to complete the IA and use or sell it
    • Ability to use or sell the IA
    • How the intangible asset will generate probable future economic benefits?
    • Availability of adequate technical, financial and other resources to complete the development and to use or sell the IA
    • Ability to measure reliably the expenditure attributable to the IA during its development.
  • If an entity cannot distinguish the research phase from the development phase, the entity treats the expenditure for that project as if it were incurred in the research phase only.

…and items similar in substance that are internally generated should not be recognised as Intangible assets.

Intangible assets are initially measured at cost.

Choose either the cost model or the revaluation model for each class of intangible asset.

The items within a class of intangible assets are revalued simultaneously.

After initial recognition intangible assets should be carried at cost less accumulated amortisation and impairment losses.

Intangible assets may be carried at a revalued amount being its fair value at the date of the revaluation less any subsequent accumulated amortisation and any subsequent accumulated impairment losses. FV shall be measured by reference to an active market. Such active markets are expected to be uncommon for intangible assets. Examples where they might exist:

  • Taxi licences
  • Fishing licences
  • Production quotas

Revaluation increases are recognised in OCI and accumulated in the “revaluation surplus” within equity except to the extent that it reverses a revaluation decrease previously recognised in profit and loss.

Intangible asset with a finite useful life is amortised.

The accounting for an intangible asset is based on its useful life.

  • Intangible asset with a finite useful life is amortised and
  • Intangible asset with an indefinite useful life is not.

The depreciable amount of an IA with a finite useful life shall be allocated on a systematic basis over its useful life.

  • The amortisation method should reflect the pattern of benefits.
  • If the pattern cannot be determined, amortise by the straight line method.
  • The amortisation charge is recognised in profit or loss unless this or another Standard permits or requires it to be included in the carrying amount of another asset.

There is a rebuttable presumption that, an amortisation method that is based on the revenue generated by an activity that includes the use of an IA is inappropriate.

An intangible asset with an indefinite useful life should not be amortised.

Test an Intangible asset with an indefinite useful life for impairment by comparing its recoverable amount with its carrying amount:

  1. Annually, and
  2. Whenever there is an indication that the IA may be impaired.

An IA shall be derecognised:

  1. ON disposal; or
  2. When no future economic benefits are expected from its use or disposal.

For each class of intangible asset, disclose:

  • Useful life or amortisation rate
  • Amortisation method
  • Gross carrying amount and accumulated amortisation
  • Line items of SOPL in which amortisation is included
  • Reconciliation of the carrying amount at the beginning and the end of the period
  • Basis for determining that an intangible has an indefinite life
  • Description and carrying amount of individually material intangible assets
  • Certain special disclosures about intangible assets acquired by way of government grants
  • Information about intangible assets whose title is restricted
  • Contractual commitments to acquire intangible assets

Additional disclosures are required about:

  • Intangible assets carried at revalued amounts
  • The amount of research and development expenditure recognised as an expense in the current period.


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