Derecognition triggers

Learning objectives

• Identify the two events that give rise to derecognition.L1, L2

Normative references

• IAS 38 §112Derecognition on disposal or when no future economic benefits are expected from its use or disposal.

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

12 questions

• Which of these events lead to the derecognition of an intangible asset?L2
• The radio station Ondine exchanges its broadcasting licence in one region (cost {gross_given_up}, accumulated amortisation {acc_amortisation_given_up}) for an equivalent licence in another region, held by a competitor. The documented analysis concludes that the exchange lacks commercial substance; the fair value of each licence is estimated at {fair_value}. Record the exchange entry.L3
• Two small tourism businesses exchange their prospect databases. The one given up by the agency Sirocco is carried at a cost of {gross_given_up}, amortised by {acc_amortisation_given_up}. The exchange has commercial substance, but none of the experts consulted manages to measure reliably the fair value of either database. Record the exchange in Sirocco's books.L3
• True or false? An intangible asset is derecognised when the entity sells it to a third party.L1
• True or false? As long as no sale has taken place, an intangible asset remains recognised, even if the entity no longer expects any future economic benefits from either its use or its disposal.L1
• True or false? A fully amortised payroll software that the entity still uses every month to produce payslips must be derecognised because its carrying amount is nil.L2
• Which two events lead to the derecognition of an intangible asset under IAS 38?L1
• Valtrion holds a patent on a surface-treatment process. A new regulation permanently bans the process: Valtrion stops using it, no buyer or licensee is conceivable and no other benefit is expected from the patent. What should Valtrion do?L2
• The Orbelline group has stopped selling products under a brand acquired a few years ago. The brand is no longer used, but a competitor has made a firm offer to buy it next quarter, and Orbelline intends to accept it. At the year-end, the brand does not yet meet the criteria for classification as held for sale (IFRS 5). How is the brand treated at the year-end?L2
• At the year-end, Duremont reviews five intangible assets. Which ones must it derecognise?L2
• The Ambrelys cooperative holds an online booking website developed by a contractor, recognised at {cost} and amortised by {accumulated_amortisation}. After the related activity is permanently closed, the website is taken offline; it will neither be reused nor sold and no disposal proceeds are expected. Record the resulting entry at the year-end.L3
• Lisandre has stopped using a finite-life manufacturing patent after a production line was shut down. It is negotiating to license the patent to a foreign manufacturer from next year. The patent is not classified as held for sale. Which treatment should be adopted at the year-end?L2