Definition of an intangible asset

Learning objectives

• Identify the three characteristics of an intangible asset: identifiability, control, future economic benefits (an identifiable non-monetary asset without physical substance).L1, L2
• Distinguish an intangible asset from expenditure that does not meet the definition.L2

Normative references

• IAS 38 §8Definitions specific to the Standard, in particular: intangible asset, asset, amortisation, carrying amount, cost, depreciable amount, research, development, entity-specific value, impairment loss, monetary assets, residual value and useful life; fair value is defined by reference to IFRS 13; the definition of an active market no longer appears in IAS 38 (deleted by IFRS 13) and the Standard relies on IFRS 13, Appendix A. Intangible asset: an identifiable non-monetary asset without physical substance. Asset: a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. Research: original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge. Development: the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products, processes, systems or services before the start of commercial production or use. Monetary assets: money held and assets to be received in fixed or determinable amounts of money.
• IAS 38 §10Not every item listed in para. 9 meets the definition of an intangible asset, which requires identifiability, control over a resource and the existence of future economic benefits. If an item does not meet it, the expenditure to acquire it or generate it internally is recognised as an expense when incurred; if the item is acquired in a business combination, that expenditure forms part of the goodwill recognised at the acquisition date (see also para. 68).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

12 questions

• True or false? Under IAS 38, an asset is an intangible asset when it is not monetary, can be identified and has no physical form.L1
• An engineering consultancy has recognised the items below as intangible assets. Which one is an error?L2
• The intangible asset register of a services company contains the following items. Which one does not meet the definition of an intangible asset?L2
• True or false? A monetary asset, such as a bank deposit, can be an intangible asset as long as it has no physical substance.L1
• True or false? A team of highly qualified engineers, recruited at great expense by Ventelis, generally does not meet the definition of an intangible asset.L2
• Which of these features is not required by the definition of an intangible asset?L1
• Brevane obtains from a public authority a legal right to operate a radio frequency. This right can be neither sold nor transferred to a third party. Is it identifiable within the definition of an intangible asset?L2
• Lindor reviews four resources. Which one meets the definition of an intangible asset?L2
• Which of the following features are part of the definition of an intangible asset?L1
• The consultancy Talvio reviews the following items. Which ones can meet the definition of an intangible asset?L2
• At the reporting date, Ombrel presents the items below as intangible assets. Which one is a classification error?L2
• An analyst claims that a recipe database acquired by Gustavia is not identifiable, because Gustavia has no intention of reselling or licensing it. Where is the flaw in the reasoning?L2