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AASB 138 - Intangible Assets - August 2015
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Turn the raw legal text into a practical explanation grounded in AASB 138 - Intangible Assets - August 2015.
67 The following are not components of the cost of an internally generated intangible asset:
(a) selling, administrative and other general overhead expenditure unless this expenditure can be directly attributed to preparing the asset for use;
(b) identified inefficiencies and initial operating losses incurred before the asset achieves planned performance; and
(c) expenditure on training staff to operate the asset.
| Example illustrating paragraph 65 |
|---|
| An entity is developing a new production process. During 20X5, expenditure incurred was CU1,000,(a) of which CU900 was incurred before 1 December 20X5 and CU100 was incurred between 1 December 20X5 and 31 December 20X5. The entity is able to demonstrate that, at 1 December 20X5, the production process met the criteria for recognition as an intangible asset. The recoverable amount of the know-how embodied in the process (including future cash outflows to complete the process before it is available for use) is estimated to be CU500.At the end of 20X5, the production process is recognised as an intangible asset at a cost of CU100 (expenditure incurred since the date when the recognition criteria were met, ie 1 December 20X5). The CU900 expenditure incurred before 1 December 20X5 is recognised as an expense because the recognition criteria were not met until 1 December 20X5. This expenditure does not form part of the cost of the production process recognised in the statement of financial position.During 20X6, expenditure incurred is CU2,000. At the end of 20X6, the recoverable amount of the know-how embodied in the process (including future cash outflows to complete the process before it is available for use) is estimated to be CU1,900. |
| At the end of 20X6, the cost of the production process is CU2,100 (CU100 expenditure recognised at the end of 20X5 plus CU2,000 expenditure recognised in 20X6). The entity recognises an impairment loss of CU200 to adjust the carrying amount of the process before impairment loss (CU2,100) to its recoverable |
| amount (CU1,900). This impairment loss will be reversed in a subsequent period if the requirements for the reversal of an impairment loss in AASB 136 are met. |
| (a) In this Standard, monetary amounts are denominated in ‘currency units (CU)’. |
Recognition of an expense