Podcast Beta
Questions and Answers
What is the primary topic of discussion?
How often should the residual value of an intangible asset be reviewed?
What happens when the residual value of an intangible asset increases to an amount equal to or greater than its carrying amount?
How is the difference between the consideration and the carrying amount of an intangible asset treated?
Signup and view all the answers
What standard is used to determine whether an intangible asset is impaired?
Signup and view all the answers
How is an intangible asset carried when it is retired from active use and held for disposal?
Signup and view all the answers
What happens to subsequent changes to the estimated consideration of an intangible asset?
Signup and view all the answers
Where should gains from the disposal of an intangible asset be classified?
Signup and view all the answers
When is an intangible asset derecognised from the balance sheet?
Signup and view all the answers
What is the cost of material and services consumed in generating an intangible asset considered as?
Signup and view all the answers
Which of the following costs should NOT be capitalised for an intangible asset?
Signup and view all the answers
According to Ind AS 103, how is the cost of an intangible asset determined in a business combination?
Signup and view all the answers
What is the condition for an intangible asset to be recognised?
Signup and view all the answers
Which of the following costs are directly related to generating an intangible asset?
Signup and view all the answers
What is the treatment of abnormal loss of material, labour or other inefficiencies?
Signup and view all the answers
What is the cost of an intangible asset that is acquired in a business combination?
Signup and view all the answers
Why are administration overheads not capitalised as part of the cost of an intangible asset?
Signup and view all the answers
What is the estimated present value of future cost savings over the four-year period?
Signup and view all the answers
What is the likely accounting treatment for the new process, considering Neha's concerns?
Signup and view all the answers
Can the cost incurred to obtain the right regarding the player be recognized as an intangible asset as per Ind AS 38?
Signup and view all the answers
What is the main reason why Neha is concerned about the new process?
Signup and view all the answers
What is the estimated useful life of the new process, according to Neha?
Signup and view all the answers
What is the main factor that determines the price the entity paid to acquire the right regarding the player?
Signup and view all the answers
Study Notes
Intangible Assets
- Estimations of intangible assets are made using prices prevailing at the date of acquisition.
- Residual value should be reviewed at least annually and changes are accounted for prospectively.
- If residual value increases to an amount equal to or greater than carrying amount, amortization is suspended until the residual value decreases below the carrying amount.
Retirement and Disposal
- An intangible asset is derecognized from the balance sheet on disposal or when no future economic benefits are expected.
- The difference between the consideration and the carrying amount is treated as gain or loss and recognized in the P&L statement.
- The consideration received or receivable is the transaction price as per Ind AS 115.
- Subsequent changes to the estimated consideration are accounted for as changes in transaction price.
- Gains are not classified as "Revenue from operations" but are part of "other income".
Impairment
- An intangible asset is impaired if its recoverable amount is less than the carrying amount.
- Determination of impairment is done using Ind AS 36.
Cost of Intangible Assets
- Cost includes:
- Cost of material/services consumed in generation of intangible asset
- Salaries, wages, and other employment benefits paid to personnel engaged in development
- Directly related overheads allocated on a reasonable and consistent basis
- Directly related costs like registration fees, amortization of patents, etc.
- Capitalized borrowing costs as per Ind AS 23
- The following costs are not capitalized:
- Selling overheads
- Administration overheads (unless directly related to generating the asset)
- Abnormal loss of material, labor, or inefficiencies
- Initial operating losses
- Training costs to operate the asset
Business Combinations
- As per Ind AS 103, the cost of an intangible asset acquired in a business combination is its fair value at the acquisition date.
- The intangible asset should satisfy the recognition criteria, i.e., it is separable or arises from contractual or other legal rights, and sufficient information exists to measure reliably.
Specific Scenarios
- If an intangible asset has a limited life, its estimated useful life should be considered.
- The cost incurred to obtain a right, such as a player's contract, can be recognized as an intangible asset if it meets the recognition criteria.
Intangible Assets
- Estimations of intangible assets are made using prices prevailing at the date of acquisition.
- Residual value should be reviewed at least at the end of every year and changes should be considered as changes in estimate and accounted for prospectively.
- If residual value increases to an amount equal to or greater than carrying amount, the asset should not be amortised till the residual value decreases to below the carrying amount.
Retirement and Disposal
- An intangible asset should be derecognised from the balance sheet on disposal or when no future economic benefits are expected from its use or disposal.
- The difference between the consideration and the carrying amount of the asset should be treated as gain or loss and recognised as income or expense in P&L statement.
- The consideration received or receivable is the transaction price as per Ind AS 115.
- Any subsequent changes to the estimated consideration should be accounted as changes in transaction price as per Ind AS 115.
- Gains should not be classified as "Revenue from operations" and should be part of 'other income'.
- An intangible asset retired from active use and held for disposal should be carried at its carrying amount at the date when the asset is retired from active use as per Ind AS 105.
Impairment
- An intangible asset is impaired if its recoverable amount is less than the carrying amount, as per Ind AS 36.
- To determine impairment, an entity applies Ind AS 36.
Case Study
- If the present value of future cost savings is estimated to be ` 9,60,000 over a period of 4 years, the asset should be accounted for accordingly.
Intangible Asset Recognition
- A cost incurred to obtain the right regarding a player can be recognised as an intangible asset as per Ind AS 38 if the entity uses and develops the player through participation in matches and the right is derived from the skills and fame of the player.
Cost of Intangible Asset
- The cost of an intangible asset includes cost of material/services consumed, salaries, wages and other employment benefits, overheads, registration fees, amortisation of patents, and borrowing costs that can be capitalised as per Ind AS 23.
- The following costs should not be capitalised: selling overheads, administration overheads, abnormal loss of material, labour or any other inefficiencies, initial operating losses, and training costs to operate the asset.
Business Combinations
- In a business combination, the cost of an intangible asset is its fair value at the acquisition date, as per Ind AS 103.
- The intangible asset should satisfy the recognition criteria, i.e., it is separable or arises from contractual or other legal rights, and sufficient information exists to measure reliably.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Assess your knowledge of Indian Accounting Standards with this quiz, covering topics related to IND AS 103. Test your understanding of financial reporting and accounting principles.
