Initial measurement at cost

Learning objectives

• Identify the initial measurement basis of an intangible asset (cost).L1, L2

Normative references

• IAS 38 §24An intangible asset is measured initially at cost.

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

13 questions

• True or false? On initial recognition, an intangible asset is measured at cost.L1
• True or false? An intangible asset is measured initially at fair value, measurement at cost being merely an option available to entities.L1
• True or false? For an intangible asset acquired in a business combination, the cost used at initial measurement is its fair value at the acquisition date.L2
• True or false? When payment for an acquired licence is deferred beyond normal credit terms, its initial cost is the total of the scheduled payments, including the portion that remunerates the credit.L2
• True or false? The initial cost of an internally generated intangible asset includes the expenditure incurred before the date on which it first met the recognition criteria.L2
• True or false? An intangible asset received in exchange for another asset is measured at fair value, unless the exchange lacks commercial substance or neither the fair value of the asset received nor that of the asset given up can be measured reliably; in that case, its cost is the carrying amount of the asset given up.L2
• Tarvine is recognising an operating licence for the first time. On what basis does it measure it initially?L1
• Corbeline buys a software licence from a foreign vendor at a list price of 120,000. It obtains a trade discount of 10,000, pays 6,000 of non-refundable import duties and incurs 4,000 of testing to check that the software works properly before it goes live. What is the initial cost of the licence?L2
• The Asteval group obtains control of Briven in a business combination and recognises a Briven patent separately from goodwill. In Briven's accounts, the patent cost 200,000 and is carried at 80,000. An independent valuer estimates its fair value at the acquisition date at 350,000. At what amount does Asteval initially recognise the patent?L2
• Aeralis receives airport slot rights free of charge from the State by way of a government grant. Which initial measurement treatments does IAS 38 permit?L2
• Lindora exchanges a broadcasting licence for a broadcasting licence covering another region, held by a peer. The analysis concludes that the exchange lacks commercial substance. The licence given up has a carrying amount of 140,000 and a fair value of 185,000; the licence received has a fair value of 190,000. At what amount does Lindora initially recognise the licence received?L2
• Quenvia is developing a pricing tool internally. The expenditure incurred from 1 January to 31 March 20X1, amounting to 30,000, was expensed. The project first meets all the recognition criteria on 1 April 20X1; the directly attributable expenditure incurred afterwards until the tool goes live amounts to 75,000. What is the initial cost of the asset?L2
• Ondéa, a broadcaster, measures its class of broadcasting licences using the revaluation model. It acquires a new licence in the same class, traded on an active market. How is this licence measured after initial recognition?L2