In this phase the entity does not make anything tangible or intangible in nature. Research: it is a planned and organized activity undertaken to acquire new knowledge or to improve current understanding. Valuation and measurement of internally generated assets on the other hand involve a different approach as they pass through two separate phases: fair value of asset acquired or the fair value of asset exchanged as consideration plus any expenditure incurred specifically to make intangible asset ready for intended purpose. Intangible assets that are purchased are valued at cost of acquisition i.e. Externally purchased separately or came with the entity purchased or obtained as grant from government.ġ.2 Valuation and measurement of Intangible assets.Internally developed as a result of application of existing knowledge or new research by entity.1.1 Acquisition of Intangible assetĪn intangible asset can be acquired in either of the two ways: If an expenditure fails to meet the definition of asset or recognition criteria then it should be recognized as an expense in the period it is incurred. the cost of the asset can be measured reliably.the future economic benefits arising from the asset are flowing to the entity and.If it fulfills the definition of asset, it has to meet the recognition criteria: the future economic benefits arising from the item should flow to the entity.it should be under the control of entity and.Just like other non-current assets, intangible assets must meet the definition of asset and also the recognition criteria to formally record the item in the financial books of the entity.įor an intangible item or an expenditure to be considered intangible asset: For example formula to make medicine doesn’t hold any physical form. It doesn’t have any material form or can’t be sensed with either of the five senses. For example cash is not an intangible asset rather it is a financial asset. These assets are not in the form of currency. Arise from legal rights (contract or other) irrespective of the fact that such rights are separable.For example, patent can be sold without selling a whole company or it can be separated from the entity and can be sold, exchanged, contracted. For an asset to be identifiable it has to be either:
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