What is IAS 38? You will find out in this article!
The International Accounting Standards Board approved IAS 38 in April 2001. Between now and 2001 some changes have been made to IAS 38. Now that you are reading this, you are probably wondering what IAS 38 is and what it stands for. You will read all about it in this article. You will also be introduced to a website where you can find more information on the subject.
IAS 38, what does it stand for?
The letters IAS stand for Intangible Assets. It is a rule that sets out the criteria for recognising and measuring intangible assets and providing information about them. The definition of an asset according to IAS 38 is a resource controlled by a company through a past event. And here the asset is expected to provide economic benefits to the company in the future.
Accounts are therefore related to this. An intangible asset is an identifiable non-monetary asset without a physical form. This asset is identifiable when it is separable. But also when it arises from contractual or legal rights. It is possible to sell, transfer and license separable assets. Examples are:
- Computer software
- Trademarks
- Licences
- Patents
- Films
- Import quotas
IAS 38 thus describes the accounting for intangible assets. Intangible assets are measured at cost on initial recognition. After this recognition, a company measures an intangible asset at cost less accumulated amortisation. The company may choose to measure the asset at fair value, in the rare cases where the fair value is determined on the basis of an active market.
For an intangible asset with a limited useful life, it is common to amortise it and subject it to an impairment test. Does the intangible asset have an indefinite useful life? If so, it is not amortised, but is subjected to an annual impairment test. And when it is disposed of, it is customary to recognise the gain or loss on disposal in the income statement.
The recognition criteria under IAS 38 is that a company itself has purchased or created the intangible asset. Other criteria is that the probable economic benefits must be based on well-founded assumptions about the circumstances that will exist during the life of the asset. Also, research costs should only be capitalised after the technical and commercial feasibility of the asset for sale or use has been established. This means that the company should have the intention to be able to complete the intangible asset and thereby sell it or demonstrate how it will generate future economic gain for the company.
Where can you find more information about IAS 38?
If you want to know more about IAS 38, but also about other rules, www.annualreporting.info is the place to be. This website is full of information. There is a handy a to z list with all terms explained. This way you will find all the information you need. So, if you want more information about this subject and you want to approach the IAS the right way, go to the website and read the articles. If you still have questions, don’t hesitate to make contact.
