There are several objectives and scope of IAS 38. To begin with IAS 38 contains the rules for the recognition and measurement of intangible assets. Excluded from the rules of IAS 38 are intangible assets whose accounting falls under another standard, financial assets according to IAS 32, intangible assets from exploration and evaluation and from expenditures for the development of materials, that are raw. There are als a numerous of different important definitions, that attempt to define IAS. An intangible asset as defined in IAS 38 is an identifiable non-monetary asset without physical substance. According to that, the identifiability of an intangible asset results from the fact that the asset is either separable (asset can be separated from the entity and sold, transferred, licensed or leased), or arises from contractual or legal rights. Research is defines that as the independent and planned search with the prospect of gaining new scientific or technical knowledge. Development is the application of research results to the production of new or substantially improved materials, devices, products, processes, systems or services.
Definition of IAS 38
According to this law, an intangible asset should be recognised only if it is probable that the expected future economic benefits embodied in the asset will flow to the enterprise and the cost of the asset can be measured in a way that is reliable. According to this IAS intangible assets are to be measured at the corresponding acquisition and production costs upon initial recognition. It requires the entity to determine whether the useful life of the intangible asset is finite or indefinite. For the subsequent measurement of intangible assets, it requires either the cost model or the revaluation model to be applied. Under the cost model according to IAS 38.74, the acquisition and production costs are to be amortised over the useful life of the asset in accordance with IAS 38.97. The amortisation is to be recognised in the income statement. Amortisation shall be recognised in profit or loss. The amortisation method and the useful life of intangible assets must be reviewed at each reporting date. The amortisation method and the useful life of intangible assets must be reviewed at each reporting date.
Intangible assets versus tangible assets according to IFRS
The accounting requirement under IFRS presupposes that an abstract and concrete accounting ability is fulfilled. According to the framework, the recognition of such assets requires that the addition was triggered by a past event. The asset is under the control of the company and an economic benefit can be derived from the asset. The main reason for distinguishing intangible assets from inventories is that intangible assets lack physical presence. According to IFRS, as in most accounting systems, a distinction is made between whether the intangible assets serve the company permanently (such as a patent for a specific product) or whether they are intended for sale for example, software developed on behalf of a customer. Intangible assets in the latter group are considered inventories. IAS 2 „Inventories“ is therefore relevant for their accounting. For intangible assets, on the other hand, IAS 38.8 comes into question. In order to find out more about this asset go and check out annualreporting.info.