Ch 1: IAS 38 Intangible Assets

1. Introduction

1-1 Introduction [O]

YouTube Video (27 minutes)

Notes PDF - FL030

Query: I have 2 questions.

1. Can you please elaborate on "Arise from Contractual or Legal Rights"  (11:14)

2. When using the term goodwill at 11:36, are we referring both "internally generated" and "externally acquired" Goodwill?


1. for example, a copyright, patent or trademark registered (legal right) in the entity's name or a license/franchise e.g. McDonalds franchise (contractual right) held by the entity.

2. Yes. Both.

Query:  "Is intangible assets must be Controlled or not"

Response: Yes. Control is one of the requisite criteria for intangible assets.

Query: sir if employees ko contract par hire kiya gya ho. let say 5 years k liye to ky un ki traning cost ko capitalize kiya ja sakta hi as an intangible asset

Response: No. If entity has paid 5 years salary in advance, it can be recognised as an asset i.e. prepaid salaries.

2. Recognition and initial measurement

2-1 Recognition and Measurement [R]

YouTube Video (17 minutes)

Notes PDF - FL031

Query: Sir Please nominal amount Ka Concept bta dien

Response: A nominal amount of money is a very small amount which is much less than something is really worth. It may be Rs. 1,000 or Rs. 100 or even Rs. 1. The purpose is to record the asset (the amount is clearly immaterial).

Query: Sir deffered payment terms ki koi example please?

Response: Watch this video at 7 minutes 7 seconds time.

3. Internally generated items

3-1 Internally generated items [I]

3-2 Q&A Saqib Limited [R]

YouTube Video (7 minutes)

Notes PDF - FR055

Query: Sar humne 2012 mine cost directly attributable to research and development ko Capitalise kiya tha aur 2013 mien ni kia mein nahin kiya iski kya vajah hai. Halanki voh bhi directly attributable to research and development thi.

Response: The reason is mentioned in video i.e. "Training costs are expensed even if directly attributable". Reference IAS 38 Para 67.

4. Acquired in business combination

4-1 Acquired in business combination [I]

YouTube Video (10 minutes)

Notes PDF - FL033

Query: Sir*buys a controlling interest* Ka mtlb kia hai

Response: In simple terms, the controlling interest in a business means we (as acquirer) own more than 50% of that company's voting shares, giving us decision making power in shareholder meetings and control over company policies.

4-2 Q&A Zouq Inc. [O]

YouTube Video (9 minutes)

Notes PDF - FR051

Query: Sir brand HM ne 90 million ni Lena is question mien

Response: For goodwill calculation Rs. 90m is correct according to partial goodwill method as used in this question. However, in business combination we record assets of subsidiary at full value because we control those assets fully even when our ownership stake is less than 100%.

5. Measurement after recognition

5-1 Measurement after recognition [R]

5-3 Q&A Zebra Limited [I]

YouTube Video (7 minutes)

Notes PDF - FR052

Query: Sir hamen kaise pata chalega ke is main interest hai ya nahin

Response: Because there was deferred payment of Rs. 36.3 million, 9 months after the acquisition of asset. This can be ignored where immaterial. However, as question clearly mentioned the discount rate, we considered it material.

5-4 Retirement and Disposal [O]

5-5 Q&A Raisin International [O]

6. Disclosure

7. SIC 32: Web Site Costs

7-1 SIC 32 Web Site Costs [I]

7-2 Q&A Ajwa Limited (ICAP Autumn 2021) [R]

7-3 Q&A Zinc Limited (ICAP Autumn 2019) [I]

8. Comprehensive Examples

8-1 Q&A Dove Limited (ICAP Spring 2021) [O]

8-2 Q&A Sunshine Limited (ICAP Autumn 2017) [I]

YouTube Video (8 minutes)

Notes PDF - FR044

Query: Sir why 1 million renewal cost wasn't added in cost of license D?

Response: Capitalising subsequent renewal cost on acquisition

Arguments in favour: 

1. Since we are considering extended useful life, the renewal costs should be capitalised.

Arguments against;

1. The entity has no obligation to renew (although it has an option).

2. The amount is immaterial (insignificant, therefore extended useful life is used)

3. IAS 38 states the costs that can be capitalised (renewal costs is not mentioned there) and states that all other costs should be charged as an expense.

So in practice, such immaterial renewal costs are ignored at acquisition and considered only when incurred.

8-3 Q&A Opal Limited (ICAP Autumn 2015) [O]

YouTube Video (8 minutes)

Notes PDF - FR042

Query: Sir HM ne 0.4 ki equipment ki Depreciation Capitalize Ku ki

Response: Because it related to development phase and capitalisation criteria was met. Depreciation and amortisation are included in the cost of another asset (rather than charged as expense in PL) when the asset being depreciated is used for development/construction of another asset.

8-4 Q&A Tulip Limited (ICAP Spring 2018) [R]

8-5 Q&A International Associates Limited (ICAP Autumn 2016) [R]

YouTube Video (13 minutes)

Notes PDF - FR045

Query: Sir jo erp redundant hua hai old valey k for the year amortization nikalte hue humne 80 - 48 phir usko divide by 5 q nahi kiya?

Response: According to point (vi) of the question, IAL uses straight line method, therefore,  Rs. 80m (cost) / 5 years x 9/12 months = Rs. 12m is correct way. 

Alternatively, it could be Rs. 80 - 48m = 32m / 2 years remaining life x 9/12 months = Rs. 12m

Note: we can calculate the useful life passed of 3 years from accumulated depreciation of Rs. 48m.

The concept is:

Original cost / original total life

Remaining carrying amount / remaining life

8-6 Q&A Qabil Limited (ICAP Autumn 2020) [I]

YouTube Video (15 minutes)

Notes PDF - FR048

Query: Sir yh  agr renew ho skta ho aur intention b ho k mzeed use kren gy to usy use ful life len gy leases ki trh?? Mny to smjha hy k 5 saal k hy cntrct to 5 saal ki kro amortize agla jb renew ho ga to 5b dkhn gy yh b keases ki trh intention oy depend krta hy?? Aur amount insignifnt ya signfnct k chkr to nae hu ahr clear kr rn

Response:  There is specific guidance on this issue in IAS 38 which must be applied. We have covered it in this 10 minutes video already:

8-7 Q&A Apple Limited (ICAP Autumn 2018) [I]

8-8 Q&A Amused Limited (ICAP Spring 2022) [R]

8-9 Q&A Sphere Limited (ICAP Autumn 2022) [I]

8-10 Q&A Hadero Limited (ICAP Autumn 2023) [R]

9. Objective Based Q&A

9-1 Objective Based Q&A [1 to 20] [O]