The financial feasibility and funding criterion was also clearly met because Lie Dharma Inc. Treatment of various costs incurred during 20X8 depends on whether these costs can be capitalized or expensed as per IAS Obvious examples are computer software, films, and licensing agreements.
These costs were incurred by the company: Interim valuations should also be obtained in years 1, 2 and 4 where there had been a material change in value. Therefore, the costs that were incurred before October 20X8 should be expensed. In order to determine whether an internally generated intangible asset qualifies for recognition, its generation is divided into a research phase and a development phase.
This article will hopefully clear up some of the confusion for preparers of financial statements under FRS The second date is the service date, which is the date that the asset is placed in service. In some cases, an intangible asset may be contained on or in a tangible item.
Control — An entity controls an asset if it has the power to obtain the future economic benefits flowing from the underlying resource and to restrict the access of others to those benefits.
Once the asset has been revalued you will need to consider the last period of depreciation.
In practice, the most common type of fixed asset to be revalued is a property although other types of fixed assets can also be revalued provided all assets in the same class are subject to revaluation at the same time. The asset is revalued to fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent impairment losses.
Under the cost model, the impairment is always recognised debited as expense. If an intangible asset has a finite life, then it is presumed to have a reliably measurable fair value. Depreciation The asset must continue to be depreciated following the revaluation.
Also in IFRS, if there is an improvement on an asset, would we increase the useful life of the asset based on the improvement carried out on the asset or would the asset have to depreciate within the initial useful life of the original asset.
Assessing the fair value of an intangible asset in a business combination can be difficult; obvious techniques are the use of comparable market transactions or quoted prices. Any fall in value below depreciated historic cost was recognised in the profit and loss account unless it could be demonstrated that the recoverable amount of the asset was greater than its revalued amount, in which case the loss was taken to the STRGL to the extent that the recoverable amount of the asset was greater than its revalued amount.
The costs eligible for capitalization are those incurred after October 20X8. If the revaluation takes place at the start of the year then the revaluation should be accounted for immediately and depreciation should be charged in accordance with the rule above.
Future Economic Benefit — Future economic benefit may include revenue from the sale of products, services, or processes, but also includes cost savings or other benefits from use of an asset.
The use of hindsight and the resultant claim to capitalize the entire expenditure is not permissible, as research expenditure must be expensed when incurred and the Standard does allow the reinstatement of previously written-off costs.
Expenditure on research or the research phase of an internal project is to be written off as an expense as and when incurred, as it is not possible to demonstrate that an asset exists that will generate future economic benefit.
Here are the rule of thumb to follow: Your choice should be based upon the need for a current tax year deduction to reduce taxable income or to simply spread the expense over several years through depreciation.
In simple terms the revalued amount should be depreciated over the assets remaining useful economic life. Is capable of being separated from the entity and sold, transferred, licensed, or rented either individually or in combination with a related contract, asset, or liability; or Arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or other rights or obligations.
From a practical point of view, most customers have the same acquisition and service date with the First Year Convention eliminating any depreciation difference between the Acquisition and Service date.
The first is the acquisition date, which is the date that the asset was acquired.
This will be the most complicated situation and you must ensure that your working is clearly structured for this; ie depreciate for first period based on old depreciation, revalue, then depreciate last period based on new depreciation rule for revalued assets.
Some assets may experience significant and volatile movements in fair value and therefore it may be the case that annual revaluations are necessary; whereas other types of assets may experience insignificant and less volatile movements in fair values which would mean the revaluation exercise is carried out less frequently.
Similarly, the purchase of customer lists or expenditure on advertising, while identifiable, does not provide control to an entity over the expected future benefits. Very often a project will commence with a research phase and after a time will evolve into the development phase.
In the case of a machine incorporating software that cannot be operated without the software, the entire item would be treated as property, plant, and equipment under IAS.
2 | IAS 16 Property, plant and equipment This fact sheet is based on existing requirements as at 31 December and it does not take into account recent standards and interpretations that have been issued but are not yet effective.
Disclosure should be made whether the revaluation was performed by an independent valuer or not. The same rule for revaluation of property applies to plant and equipment. However, there are difficulties of obtaining a market value for plant and equipment that are recognised in IAS The purpose of IAS 38, Intangible Asset is to prescribe the recognition and measurement criteria for intangible assets that are not covered by other Standards.
This Standard will enable users of financial statements to understand the extent of an entity’s investment in such assets and the movements therein.
Substantive testing - Property, plant and equipment 3 Financial statement assertion Audit objective Existence and occurrence – Additions represent assets acquired in the year and disposal represent assets sold or scrapped in the year.Ias 16 property plant and equipment