This Blog is written by Mr. Adnan Khan, Associate Audit and Assurance Services. Please read this blog and provide your valued comments.


Intangible asset:

An identifiable nonmonetary asset without physical substance.

An asset is a resource that is controlled by the enterprise as a result of

  • Past events (for example, purchase or self-creation)
  • and from which future economic benefits (inflows of cash or other assets) are expected.

Thus, the three critical attributes of an intangible asset are:

  • Identifiable
  • control (power to obtain benefits from the asset)
  • Future economic benefits (such as revenues or reduced future costs)

An intangible asset is identifiable when

  • It is separable (capable of being separated and sold, transferred, licensed, rented, or exchanged, either individually or as part of a package)
  • Or arises from contractual or other legal rights
  • Regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

Recognition Criteria:

IAS 38 requires an enterprise to recognize an intangible asset, whether purchased or self-created (at cost) if

  • It is probable that the future economic benefits that are attributable to the asset will flow to the enterprise; and
  • The cost of the asset can be measured reliably. This requirement applies whether an intangible asset is acquired externally or generated internally.
  • IAS 38 includes additional recognition criteria for internally generated intangible assets.

The probability of future economic benefits must be based on reasonable and supportable assumptions about conditions that will exist over the life of the asset.  The probability recognition criterion is always considered to be satisfied for intangible assets that are acquired separately or in a business combination.  If recognition criteria not met. If an intangible item does not meet both the definition of and the criteria for recognition as an intangible asset, IAS 38 requires the expenditure on this item to be recognized as an expense when it is incurred.

Examples of intangible assets:

  • Computer software
  • Patents
  • Copyrights
  • Motion picture films
  • Customer lists etc…

Measurement of Intangible Assets


Intangible assets are initially measured at cost.

 Subsequent to Acquisition:

Cost Model and Revaluation Models Allowed An entity must choose either the cost model or the revaluation model for each class of intangible asset.

 Cost model.

 After initial recognition the benchmark treatment is that intangible assets should be carried at cost less any amortization and impairment losses.

 Revaluation model.

  • Intangible assets may be carried at a revalued amount (based on fair value) less any subsequent amortization and impairment losses only if fair value can be determined by reference to an active market.
  • Under the revaluation model, revaluation increases are credited directly to “revaluation surplus

Adnan Khan