· Not applicable to intangibles covered by other AS, financial assets, mineral rights/expenditure on exploration, etc. arising in insurance enterprises from contracts with policy holders and also to expenditure in respect of termination benefits.
· An intangible asset is an identifiable non-monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. An asset is a resource:
o controlled by an enterprise as a result of past events; and
o from which future economic benefits are expected to flow to the enterprise.
· Useful life is period of time over which an asset is expected to be used or the number of production units expected to be obtained from the asset.
· Impairment loss is the amount by which the carrying amount exceeds its recoverable amount.
· An intangible asset to be recognised only if future economic benefits will flow and the cost of the asset can be measured reliably.
· Probability of future economic benefits to be assessed using reasonable and supportable assumptions.
· An intangible asset should be measured initially at cost.
· Internally generated goodwill, brands, mastheads, publishing titles etc. should not be recognised as an asset.
· No intangible asset arising from research to be recognised and expenditure on research should be recognised as an expense, when incurred.
· An intangible asset arising from development to be recognised, if an enterprise can demonstrate its feasibility to complete, intention and ability to use or sell, generation of future economic benefits, and availability of resources for completion and ability to measure the expenditure.
· Expenditure on an intangible item that cannot be treated as an asset, should be recognised as an expense and treated as goodwill (capital reserve), in case of an amalgamation (AS 14).
· Treatment of expenditure (other than expenditure on VRS) incurred on intangible items, which do not meet the criteria of an 'intangible asset':
o If incurred after the date of AS 26 becoming mandatory – to be expensed out when incurred;
§ The balances of expenditure incurred before the date of AS 26 becoming mandatory and appearing in the balance sheet, should continue to be expensed out over a number of years as originally contemplated;
§ If such balances have been adjusted against the opening balances of revenue reserves as on 1-4-2003, it should be rectified and treated on the above lines.
· Expenditure, on an intangible item recognised as an expense should not form part of cost of an intangible asset at a later date.
· Subsequent expenditure to be added to cost only if is probable that the expenditure will generate future benefits in excess of the original estimates.
· An intangible asset should be carried at its cost less any accumulated amortisation and any accumulated impairment loses.
· An intangible asset should be amortised over its useful life on a systematic basis, to reflect the pattern in which the economic benefits are consumed or if the pattern cannot be determined reliably, on the straightline method.
· There is a rebuttable presumption for useful life of an intangible asset – not exceeding ten years from the date it is available for use. In case of intangible assets in form of legal rights, the useful life is not to exceed the period of the legal rights, unless renewable, which is virtually certain.
· Residual value to be taken as zero unless a commitment to purchase the asset or an active market exists.
· The amortisation period and method to be reviewed at each financial year end and any change to be accounted for as per
AS 5.
AS 5.
· Any impairment losses to be recognised.
· The recoverable amount of each intangible asset to be estimated at each year end in case of an intangible asset which is not yet available for use and one which is amortised over a period exceeding ten years.
· An intangible asset to be derecognised on disposal or when no future economic benefits are expected from its use and gain or loss recognised.
· Disclosure for each class of intangibles, their useful lives, amortisation rate, amount and method, carrying amount (gross and net), any additions, retirements, impairment losses recognised or reversed and any other change.
· In case of useful life of an intangible asset exceeding ten years, proper disclosure of the reasons for the same should be given.
· Research and Development expenditure recognised as expense to be disclosed.
On standard being applicable, adjustment to any intangible asset as required to be made with a corresponding adjustment to the opening revenue reserves.
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