IAS 38Chapter 3Lesson 1
Recognising an intangible asset: the two conditions
Step 1 of 10Learning objectives
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Meeting the definition of an intangible asset is not enough: the entity must also show that future economic benefits are probable and that cost can be measured reliably. The asset is then initially measured at cost. For a separately acquired asset, the probability condition is deemed met; subsequent expenditure, on the other hand, is usually expensed.
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Learning objectives
- Explain why an item that meets the definition of an intangible asset must still satisfy two recognition criteria.
- Identify the two criteria (probable future benefits, cost measurable reliably) and explain why probability is deemed met for a separately acquired asset.
- Remember that initial measurement is at cost, then calculate and record the cost of a separately acquired licence.
- Determine whether subsequent expenditure is added to the asset or recognised as an expense.