Financial Accounting : An Intangible Asset

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

E12-1 (Classification Issues—Intangibles) Presented below is a list of items that could be included in the intangible assets section of the balance sheet.

All of these identifiable intangible assets meet the contractual-legal criterion for the recognition of intangible assets as required by ASC…..(FIND STD FOR INTANGIBLE ASSET CRITERION). Tom’s Tractor also acquired Tractor Heaven. Among the assets acquired from Tractor Heaven are a customer list, and a non-contractual relationship with Bonanza Farming. One-half of the customer list has confidentiality agreements attached to them and therefore do not meet the separability or contractual-legal criterion for the recognition of intangible assets. Therefore, the one-half of the customer list that does not contain confidentiality agreements does meet the separability criterion for intangibles and is an identifiable intangible asset that is listed separately from goodwill. The customer relationship with Bonanza Farming is contingent on the details of the relationship as more information is needed to make a judgment. The net result of Tom’s acquisitions is less externally purchased goodwill on the balance sheet and more intangible assets separately listed. Furthermore, this gives investors more information concerning the reasons for acquiring these two companies (i.e. it will be more obvious to users that the business purpose for purchasing Tractor Heaven and RLS is due to their customer relations needed for Tom’s Tractor to gain market share, increase customer awareness, etc.)

International Reporting Standards (IFRS) are standards that are aimed as a global language that is common for affairs of business, to make sure that the accounts of the company can be understood and are of a certain standard that applies worldwide. IFRS are

IAS 38 is an accounting standard regarding intangible assets. It supplies accounting rules for intangible assets that are purchased, acquired in a business combination, and internally generated. According to Investopedia, intangible assets are nonmonetary assets without a physical presence, that have useful lives greater than one year. This type of asset is held for use in the production of goods or services, for rental to others, or administrative purposes. Examples of intangible assets include trademarks, customer lists, licensing agreements, service contracts, etc. Brand name

The recoverable amounts of the following types of intangible assets should be measured annually whether or not there is any indication that it may be impaired, which means all intangible assets in Foster have to be included. An intangible asset with an indefinite useful life means:

However, an asset is only recognized as per AASB 116 in financial statement if it is probable that the future benefits from the asset will eventuate and if the item has a cost or value that can be measured. (Leo, Hoggett & Sweeting, 2012) The term probable is means the like for the future benefit is higher than less likely to happen. An element will be considered as an asset only if it satisfy the probability of providing future benefits. (Aasb.gov.au, n.d.) An item will usually have a cost or value to use to measure reliably. The measurement of asset is made at its cost and appropriate measurement basis will be based upon model of accounting being applied. (Aasb.gov.au, n.d.) Items that so not have a cost or cannot be measured reliably cannot be considered as an asset. (Aasb.gov.au, n.d.)

According to the Oxford Dictionary of Accounting intangible asset is ‘’An asset that can neither be seen nor touched’’. In the current market place the most common examples of these types of assets would be goodwill, brand recognition and intellectual properties such as patents, trademarks and copyrights. In this essay I will attempt to answer what difficulties an accountant will face when trying to measure these intangible assets.

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.

Often there are assets that do not appear on the balance sheet of the investee; however as per initial measurement guidance all identifiable assets must be measured. According to ASC 805-20-25-10 “An intangible asset is identifiable if it meets either the separability criterion or the contractual-legal criterion described in the definition of identifiable.” This means that if an asset is separable from the entity or arises due to contractual rights, even if it lacks physical substance, it must be recognized at fair market value. Often the value of the entity cannot be seen on a balance sheet and it is important to realize that even if an asset is not in the acquired entities financials but it holds value, there is a distinct possibility that it will meet the separability criterion and thus must be valued at fair market value as of the acquisition date.

Recently, importance of intangible assets for a reporting entity has been increasing continuously. This report will discuss intangible assets with indefinite or infinite useful life and research and development expenditure in SEEK Ltd annual report 2014. This report will state the background of SEEK Ltd and the increasing importance of intangible assets. Furthermore, the disclosure of intangible assets and research and development expenditure will be revealed. Moreover, this report will critically evaluate whether the disclosures SEEK has made are in accordance with requirements of intangible assets’ segment in AASB 138. Consequently, this report will summary the findings and states the basic recommendation.

One of these is with regards to goodwill and intangible assets with identifiable useful lives.

Financial accounting provides information as a whole in terms of income, expenses, assets and liabilities. It does not provide detail of the cost involved by department, processes, products services or other unit of activity within the organization.

Financial accounting is branch of accountancy that deals with the financial statements which helps in informing public as well other concerned people who are not involved in day to day working of a company, about its current financial performance. Different stages involved in financial accounting are governed by certain standards set by organisations such as The International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB). The standards made by IASB are known as International Financial Reporting Standards (IFRS) and by FASB is known as Generally Accepted Accounting Principles (GAAP). IFRS is applicable in international level and GAAP is used mainly in the United States.

PROPERTY, PLANT AND EQUIPMENT I. Major Characteristics a. Tangible assets (with physical substance) b. Used in business – production or supply of goods or services, for rental purposes, and for administrative purposes c. Expected to be used for a period of more than one year Examples  Property not subject to depreciation – e.g., land  Property subject to depreciation – e.g., building, machinery, equipment, furniture, fixtures, leasehold improvements II. Initial Recognition a. Should comply with recognition criteria for assets – i.e., reliable measure of cost and probable flow of future economic benefits b. Measured at cost – amount of cash or cash equivalent paid and the fair value of any consideration given to acquire an asset at the