ACCT1054 Chap.3 Intangible Assets: Recognition and Measurement
Intangible Assets: Recognition and Measurement
Intangible accounting depends on identifiability, control, future benefits and reliable measurement. This chapter contrasts separately purchased rights with internally generated expenditure, draws the research-development boundary and separates recognition from the available-for-use date. Finite-life and indefinite-life paths then determine amortisation, impairment and recurring review.
What this chapter covers
- 01
Identifiability and control
- 02
Purchased intangible cost
- 03
Research expense boundary
- 04
Development recognition criteria
- 05
Finite and indefinite useful lives
Worked example · free
Three clocks for software expenditure
- +1Recognise the purchased licence at cost.
- +1Expense research as incurred.
- +1Capitalise only post-criteria development expenditure.
- +1Delay amortisation until the platform is available for use.
Key terms
- Identifiability
- Identifiability arises from separability or contractual or legal rights.
- Research phase
- Research phase expenditure is exploratory spending recognised as expense when incurred.
- Development phase
- Development phase expenditure is recognised only after every specified criterion is demonstrated.
Intangible Assets: Recognition and Measurement FAQ
Can successful research be capitalised later?
No. Expenditure originally recognised as research expense is not reinstated after a project succeeds. Capitalisation begins prospectively when all development recognition conditions are first demonstrated.
When does amortisation begin?
Amortisation begins when the intangible asset is available for use, not automatically when cash is paid or development cost is first recognised. Identify the operational readiness date from the facts.
Does indefinite life mean permanent value?
No. It means no foreseeable limit is currently identified. The asset is not amortised, but it receives annual impairment testing and the useful-life conclusion is reviewed each reporting period.
Exam move
Create a two-axis table with acquisition route across the top and useful life down the side. Place purchased, research and development spending into the correct cell, then add the recognition date, amortisation start and impairment rule for each item. Begin each practice case by highlighting separability or contractual rights, control evidence, expected benefits and measurement evidence.
If one element is absent, write what additional fact would be needed rather than forcing recognition. Build a timeline for internal projects with research on the left, the date all development conditions are first demonstrated in the centre, and availability for use on the right. Allocate each expenditure to its date before adding totals. This prevents later success from pulling earlier research onto the balance sheet.
Practise the distinction between recognition and amortisation by using an unfinished project that qualifies for recognition before year-end. The recognised balance can exist without current amortisation, but it still requires review for impairment indicators. For purchased items, separate legal life, expected useful life and renewal assumptions.
Choose the shorter economically supported period when the facts impose a limit, and explain any renewal evidence rather than assuming indefinite benefits. Rehearse finite-life and indefinite-life answers side by side. Finite life needs amortisation from availability for use plus impairment when indicated. Indefinite life needs no amortisation, annual impairment testing and annual review of the life conclusion.
Keep active-market evidence in its own note because revaluation is not available merely because management believes a brand has increased in value. Add recognition drills for brands, customer lists, training, advertising, software, patents and development projects. For every item, state whether the obstacle is identifiability, control, future benefits, measurement or a specific prohibition.
Keep subsequent expenditure separate from initial recognition and ask whether it creates a distinct resource. Practise changes from indefinite to finite life prospectively and calculate the new amortisation base only from the reassessment date. Build an impairment checklist for assets not yet available for use and indefinite-life assets.
Use disclosure examples to connect useful-life judgements, amortisation methods and impairment assumptions to user understanding. Turn textbook examples into fresh scenarios by changing the acquisition route and readiness date, not by copying company names or numbers. After each solution, check three clocks: recognition date, available-for-use date and reporting date. Then state the carrying amount movement and note treatment.
In timed revision, write purchased, research, development, finite and indefinite as headings before reading the details. Place facts beneath the headings and use the resulting structure to build the answer. The final sentence should say whether cost is expensed, capitalised, amortised, tested for impairment or disclosed, with the date that controls the action.
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