Accounting Treatment For Intangible Assets

Assets are to be recorded and valued based of the type of asset there are.

Intangible assets are one of the most significant items in Myers financial statement. It consists of goodwill, brand names and trademarks, software and leases. AASB 136 Impairment of Assets requires Goodwill and some of the brand names that are indefinite useful life to test for the impairment. In Myer, there is no impairment loss. Furthermore, the accumulated amortisations of the other intangible assets are shown in the table X have a total value of $73585 thousand. According to AASB 117 Leases, the total rentals leases over the leases term are being expensed on a straight-line basis. In contrast, Myer’s competitor David Jones has only two intangible assets goodwill and software. The accumulated amortisation for software is $28808 thousand which is shown in the table X and it is the total value of accumulated amortisation.

With reference to the measurement of tangible non-current assets, critically evaluate whether financial statements prepared using IFRS’s provide useful information. Use specific examples from the annual reports of FTSE 100 companies to illustrate your points.

Furthermore, the Key Audit Matter (KAM) of goodwill and intangible assets disclosed in Telstra Corporation Ltd annual report are recognised as core assets. In note 2.4.2, it can be seen that intangible assets has the highest deferred tax liabilities after non-current assets. This is to be expected since it is a telecommunication and technology company so the cost incurred is significant for intangible assets such as research and development, capital costs and obtained intangible assets. Therefore, this is considered highly material as the events or transactions would impact Telstra as a whole such as the industry competitiveness and not just the financial statement alone. Moreover, it is complex to evaluate the impairment of the goodwill and

IASB. 2010, "The Conceptual Framework for Financial Reporting" IFRS, pp. A21- A38, viewed 23 April 2014,

The fair value of an asset is defined as ‘the price that would be received to sell an asset paid to transfer a liability in an orderly transaction between market participants at the measurement date” (Kieso, Weygandt, & Warfield, 2012). It is a market based measure (Averkamp, 2014). Over the past few years, Generally Accepted Accounting Principles has called for the use of fair value measurement in a company’s financial statements. This is what is referred to as the fair value principle (Kieso, Weygandt, & Warfield, 2012). The fair value of an asset or liability is based on an estimate of what the asset should be worth at the time of sale. This gives rise to some conflict among accounting professionals. It is believed that fair value may not be as accurate

Fabricant (1936) and ARB (1940). Evidence from Australia is provided in Whittred and Chan (1992), Brown et al.

According to the basis of preparation of accounting policies in the group annual report 2015, the group financial reports had prepared under Corporate Act 2001, Australian Accounting Standard Board and mandatory financial reporting requirements in Australia. And, the financial reports comply with International Financial Reporting Standard (IFRS) that issued by International Accounting Standard Board (IASB). However, the group annual report have changed their compliances except still applicable compliances to follow new

(2) iGAAP permits some capitalization of internally generated intangible assets (e.g., brand value), if it is probable there will be a future benefit and the amount can be reliably measured. U.S. GAAP requires expensing of all costs associated with internally generated intangibles;

The transition to International Financial Reporting Standards (IFRS) since 1 January 2005 has changed accounting treatment for goodwill in Australia. Prior 2005, goodwill and other intangible assets were amortized over a period not in excess of 20 years. However, International Accounting Standard Board (IASB) has been issuing a new concept in order to replace amortization of goodwill. Instead, companies should do an impairment testing based on International Accounting Standard (IAS) 36 which is adopted in Australian Accounting Standard Board (AASB) 136.

If an intangible asset is not able to meet either of these criteria, it should be recognized as an expense rather than being capitalized to the statement of profit or loss when it incurs. IAS 38 therefore specifically prohibits recognizing internally generated goodwill, customer lists, publishing titles, brands, start-up costs, mastheads and training costs etc.

AASB 138 defines intangible assets as “identifiable non-monetary assets without physical substance”. Such assets include but are not limited to goodwill, trademarks, patents and research and development. AASB 138 Intangible Assets has been implemented to prescribe the accounting treatment for intangible assets that have not been specifically dealt with in any other standard. Therefore, this standard only applies to intangible assets that have not been previously dealt with. Furthermore, it can be established that this standard is an example of normative accounting theories because the standard prescribes what should be done, rather than predicts what people may do. According to AASB 138 Intangible Assets, in order for an asset to be recognised in the financial statements it must meet specific criteria. The required criterion states that the asset must be identifiable, the entity has control of the asset, future economic benefits are probable and the cost of the asset can be measured reliably.

Accounting is a science based on observation. As companies change, the way accountants observe companies must change. Traditional balance sheets, income statements, and statement of cash flows no longer adequately describe a company due to the rapid growth of knowledge-based companies, especially in technological sectors. The Internet and a growth in service industries are also accelerating the need for a change in the way we analyze a firm. Financial statements are failing to adequately describe "corporate vital signs" by ignoring the importance of ideas, brands, ways of working, and franchises. Intellectual Capital (IC) is

In simple words, the basic difference between tangibles and intangibles is that tangibles relates to those physical assets which can be touched such as machineries whereas intangibles refer to assets that do not have a physical presence. However in the world of accounting standards, the definition of intangibles becomes quite precise as IAS 381 defines an intangible asset as ‘an identifiable non-monetary asset without physical substance’ - where an asset is identifiable if it is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, asset or liability or arises from contractual or other legal rights, regardless of whether those rights are transferrable or separable from the entity or from the rights and obligations. Thus

ACC307 INDIVIDUAL ASSIGNMENT TASK 1: Contemporary Issues of Accounting Theory Fair Value Measurement Overview After the International Accounting Standards Board (IASB) released the IFRS 13 Fair Value Measurement in May 2011 for the purpose of completing its joint project with the US Financial Accounting Standards Board (FASB) on fair value, the Australian Accounting Standard Board (AASB) released the Australian equivalent - AASB 13 Fair Value Measurement in the September of the same year. This standard permitted early adoption but generally started to take effect for the financial reporting periods beginning from 1 January 2013. This new standard requires no new requirement for the adoption and but it was accompanied with the issuing of AASB 2011-8 Amendments to Australian Accounting Standards arising from the AASB 13 which has made consequential changes to 32 standards and 9 interpretations for the adoption in Australia. The new standard attempts to unify IFRS and US GAAP by specifying how entities should apply the fair value measurements that applied in previous IFRS standards. It clarifies and redefines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”, sometimes referred to as an “exit price”. It also sets out a single source guidance for a robust measurement framework to ensure that the requirements are applied consistently and have clear