Download Handout
Past Exams Link
IAS 38 – Intangible Assets
IAS 38 is the International Accounting Standard that provides guidelines on the accounting treatment of Intangible Assets — non-physical assets that lack physical substance but provide long-term value to an entity, such as patents, trademarks, copyrights, and goodwill. 
Key Aspects of IAS 38
1. Definition
An Intangible Asset is an asset that:
-
Is non-monetary and lacks physical substance
-
Can be identified separately from the entity (e.g., patents, software)
-
Provides future economic benefits (e.g., through royalties, licensing, or cost savings)
2. Initial Recognition 
An intangible asset is recognized when:
-
It is probable that future economic benefits will flow to the entity
-
The cost of the asset can be measured reliably
Costs incurred for research and development (R&D) are treated as follows:
-
Research costs: Expensed as incurred
-
Development costs: Capitalized as an intangible asset if certain criteria are met
3. Initial Measurement 
Intangible assets are initially measured at cost, which includes:
-
Purchase price (including import duties and non-refundable taxes)
-
Directly attributable costs necessary to bring the asset to use (e.g., legal fees, registration costs)
4. Subsequent Measurement 
There are two models for subsequent measurement of intangible assets:
-
Cost Model:
-
The asset is carried at cost less accumulated amortization and impairment losses
-
-
Revaluation Model:
-
If an active market exists, the asset can be carried at revalued amount (fair value) less accumulated amortization and impairment losses
-
Note: Revaluation Model is only allowed when fair value can be reliably measured, and an active market exists.
5. Amortization 
-
Intangible assets with finite useful lives are amortized over their useful life.
-
Amortization methods can include straight-line or other methods that best reflect the pattern of consumption of future economic benefits
-
If an asset has an indefinite useful life, it is not amortized but is tested for impairment annually
6. Impairment 
Intangible assets are tested for impairment under IAS 36.
-
If the carrying amount exceeds the recoverable amount, an impairment loss is recognized
7. Derecognition 
An intangible asset is derecognized (removed from the financial statements) when:
-
It is disposed of (sold, transferred, or abandoned)
-
It is no longer expected to provide future economic benefits
Any gain or loss on derecognition is recognized in profit or loss
8. Disclosures 
Entities must disclose:
-
The useful life or amortization period of intangible assets
-
The amortization method used
-
If the revaluation model is applied, the fair value of the asset
-
The carrying amount of each class of intangible asset (e.g., patents, trademarks)
-
Any impairment losses recognized
