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The accounting treatment of intangibles

• Journal reading by Zeghal& Maaloul(2011)

• “The valuation of intangible assets within the  accounting framework raises several problems  relating to their identification, measurement  and control” (p.262)

• “Under current accounting standards, most  intangible investments are to be expensed  when incurred” (p. 263)

 “Lack of accounting recognition on intangible  investments as assets” (p. 263)

• “serious accounting problems could arise  when the asset is internally generated by the  company” (p. 263)

• “the accounting standards impose, for the  accounting of intangibles, conditions that are  so restrictive that only a few appear in the  assets” (p.264)

• We are only interested in  how the IASB looks  at intangibles (the standards issued by IASB  are adopted by Australia).

• DO NOT use FASB definitions or rulings as they  ARE NOT the IASB/Australian accounting  standard.

• Read the Australian accounting standard  AASB138 Intangibles (equivalent to IAS 38)

 Identifiability and Control are important  aspects to be met in definition, but both are  difficult to determine or to argue that they can  be met

• Secondly, recognition criteria are problematic  for intangibles. How do we obtain a reliable  measure? If acquired separately or in business  combination this is not difficult

• To be able to measure reliably “presents great  difficulty in the case of internally generated  assets such as software, trademarks,  patents…the results of research and  development activity” (p.264)

• “The cases where expenses related to the  creation of intangible assets could appear in  the balance sheet are scarce” (p. 264)

• The conservatism principle that underlies  much of accounting “justifies the immediate  expensing of intangible investments” (p.265) • No further part of the journal is particularly  relevant to your in?class essay.


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The term “intangible asset” is related to the valuation of a business. Literarily the word “intangible” denotes that, which has no physical form. A business is formed of mixed assets, basically divided into two main section – tangible asset and intangible asset. A tangible asset is defined to have a physical shape, like building, equipment, furniture, electronic gadgets, and other physical resources. It is tangible because you are assured of its price value by exchanging money. There are some assets which are both tangible and intangible in nature. Like – property, plan, and equipment (PPE). Whereas, the receivable loan cannot be considered as the intangible though it is lack of monetary form. Some intangible assets are identified with an indefinite life. For example, goodwill and trademark. It is palpable in nature. Goodwill is an ideal example of an intangible asset with indefinite lifetime, as the trademark can be purchased whereas goodwill cannot be shared between companies.

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