Intangible Assets
Intangible Assets
Intangible Assets
PAS 38
INTANGIBLE ASSET
1. Identifiability
2. Control
3. Future economic benefits
RECOGNITION
Subsequent measurement:
Note: Revaluation model can only be used if there is an active market for the asset.
DIFFERENT MEANS OF ACQUIRING INTANGIBLE ASSET
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
This is in accordance with R.A. No. 8293 or the Intellectual Property Code of the Philippines.
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On December 31, year 4, the product covered by the patent was withdrawn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
Goodwill is measured by comparing the purchase price for the entity with the
net tangible and intangible identifiable assets
FOUR METHODS:
1. Purchase of average excess earnings
2. Capitalization of average excess earnings
3. Capitalization of average earnings
4. Present value method
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