Measurement after recognition INVESTMENT PROPERTY

Chapter 12 – Intangibles Page 147 and knowledge will lead to increased economic benefits flowing to it, it has insufficient control over them, since they can usually leave at short notice. Without the protection of a legal right, the entity has insufficient control over the expected future economic benefits from customer relationships to meet the definition of an intangible asset. However, it is possible for an entity to sell part of a customer list, but such a sale is not a business combination. The ability to exchange, for example, a customer relationship is evidence that the entity has control over the future economic benefits flowing from that relationship, and therefore meets the definition of an intangible asset. Future economic benefits flowing from an intangible asset may arise from increased revenue, but may also arise from the reduction of costs as a result of, for example, a legal right to use a new technology. 5 Initial Recognition and Measurement Before an intangible asset can be recognised in the financial statements, not only does it need to meet the definition discussed above but it also needs to meet certain recognition criteria. The recognition criteria are that: [IAS 38.21]  it is probable that future economic benefits from the asset will flow to the entity; and  the cost of the asset can be measured reliably. IAS 38 provides examples of where expenditure is incurred to provide future economic benefits to the entity, but where no intangible asset should be recognised because the relevant expenditure cannot be measured reliably. Such expenditure should instead be recognised as an expense. Examples include expenditure on start-up activities, staff training costs even where this is directly related to a new asset, advertising and promotional activities, and expenditure on relocating an activity. [IAS 38.69]

5.1 Separately acquired intangible assets

In most cases separately acquired intangible assets, for example brands, licences, computer software and patents, meet the above recognition criteria. An intangible asset should be initially recognised at its cost. Cost includes the net amount paid for the asset after taxes, trade discounts and other directly attributable costs. Other directly attributable costs might include, for example, professional fees, or costs incurred to test the functionality of the asset. Such costs do not include the cost of incorporating the new asset into the existing business, or general administrative and overhead costs. The requirements for the recognition and timing of costs capitalised as part of the cost of the intangible asset are similar to those set out in IAS 16. Capitalisation of costs should cease when the asset is ready for use even if the asset has not yet been put into use, or is operating at below expected levels. Illustration 1 An entity acquires new technology that will revolutionise its current manufacturing process. The costs are set out below: CU Original cost of the new technology 1,000,000 Discount provided 100,000 Staff training incurred in operating the new process 50,000