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What is Intangible Asset ?

  • An identifiable non-monetary asset without physical substance (MFRS 138)
  • The existence of such assets may be indicated by legal documents that describe their rights
  • The entity has control over the intangibles
  • It is expected that the future economic benefits will flow to the entity


Cost cannot be capitalized

  • The costs relating to many internally generated intangible items cannot be capitalized and are expensed as incurred :
    • Research cost
    • Start up cost
    • Training cost
    • Advertising & Promotion

Useful life of Intangible Asset

  • Assets can be applied in 2 ways :
Useful life Accounting treatment
Finite life Amortization is the systematic allocation of the depreciation amount of an

intangible asset over its useful life

Indefinite life Should be tested for impairment annually but not amortized