1         Initial Recognition

On initial recognition, intangible asset shall be carried at cost.

Exam Support:

You need to know which intangible assets are capitalised and which intangible assets are expensed. Conclusive list of intangible assets is difficult to compile; therefore, you should learn the criteria for capitalisation of intangible assets defined by IAS 38 Intangible Assets.

2         Subsequent Recognition

An entity shall choose either the cost model or the revaluation model as its accounting policy. If an intangible asset is accounted for using the revaluation model, all the other assets in its class shall also be accounted for using the same model, unless there is no active market for those assets.

A class of intangible assets is a grouping of assets of a similar nature and use in an entity’s operations. The items within a class of intangible assets are revalued simultaneously to avoid selective revaluation of assets and the reporting of amounts in the financial statements representing a mixture of costs and values as at different dates.

1.1       Cost Model

After initial recognition, an intangible asset shall be carried at its cost less any accumulated amortisation and any accumulated impairment losses.

1.2       Revaluation Model

After initial recognition, an intangible asset shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated amortisation and any subsequent accumulated impairment losses. For the purpose of revaluations under this Standard, fair value shall be measured by reference to an active market. Revaluations shall be made with such regularity that at the end of the reporting period the carrying amount of the asset does not differ materially from its fair value.

The revaluation model does not allow:

  1. The revaluation of intangible assets that have not previously been recognised as assets; or
  2. The initial recognition of intangible assets at amounts other than cost.

The revaluation model is applied after an asset has been initially recognised at cost. However, if only part of the cost of an intangible asset is recognised as an asset because the asset did not meet the criteria for recognition until part of the way through the process, the revaluation model may be applied to the whole of that asset. Also, the revaluation model may be applied to an intangible asset that was received by way of a government grant and recognised at a nominal amount.

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