Indian Accounting Standard (Ind AS) 38, Summary
Indian Accounting Standard (Ind AS) 38, Intangible Assets, prescribes the accounting treatment for intangible assets that are not dealt with specifically in another standard. It requires the entity to recognise an intangible asset if, and only if, specified criteria are met. The standard also specifies how to measure the carrying amount of intangible assets and requires specific disclosures about intangible assets.
This standard shall be applied in accounting for intangible assets, except:
– Intangible assets that are within the scope of another standard,
– Financial assets, as defined in Ind AS 32, Financial Instruments: Presentation,
– The recognition and measurement of exploration and evaluation assets, and
– Expenditure on the development and extraction of minerals, oil, natural gas and similar non-regenerative resources.
An intangible asset is identifiable if it either:
– Is separable, i.e. is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so, or
– Arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.
An intangible asset shall be recognised if, and only if:
– It is probable that the expected future economic benefits that are attributable to the asset will flow to the entity, and
– The cost of the asset can be measured reliably.
An entity shall assess the probability of expected future economic benefits using reasonable and supportable assumptions that represent management’s best estimate of the set of economic conditions that will exist over the useful life of the asset.
An intangible asset shall be measured initially at cost.
Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance shall not be recognised as intangible assets.
An entity shall assess whether the useful life of an intangible asset is finite or indefinite and, if finite, the length of, or number of production or similar units constituting, that useful life. An intangible asset shall be regarded by the entity as having an indefinite useful life when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity.
The useful life of an intangible asset that arises from contractual or other legal rights shall not exceed the period of the contractual or other legal rights, but may be shorter depending on the period over which the entity expects to use the asset.
The depreciable amount of an intangible asset with a finite useful life shall be allocated on a systematic basis over its useful life. Amortisation shall begin when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Amortisation shall cease at the earlier of the date that the asset is classified as held for sale in accordance with Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations and the date that the asset is derecognised.
The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless:
- There is a commitment by a third party to purchase the asset at the end of its useful life, or
- There is an active market for the asset and:
- Residual value can be determined by reference to that market, and
- It is probable that such a market will exist at the end of the asset’s useful life.
The amortisation period and the amortisation method for an intangible asset with a finite useful life shall be reviewed at least at each financial year-end.
An intangible asset with an indefinite useful life shall not be amortised. The useful life of an intangible asset that is not being amortised shall be reviewed each period to determine whether events and circumstances continue to support an indefinite useful life assessment for that asset.
An intangible asset shall be derecognised:
– On disposal, or
– When no future economic benefits are expected from its use or disposal.