Intangible Assets and PPE PDF

Intangible Assets and PPE Government Accounting Intangible Assets Government Accounting Intangible Assets Intangible Assets – are identifiable non-monetary asset without physical substance Versus Intangible Heritage Assets – are intangible assets which displayed the following charac...

Intangible Assets and PPE Government Accounting Intangible Assets Government Accounting Intangible Assets Intangible Assets – are identifiable non-monetary asset without physical substance Versus Intangible Heritage Assets – are intangible assets which displayed the following characteristics: 1. Their value in cultural, environmental and historical terms is unlikely to be fully reflected in a financial value based purely on a market price; 2. Legal and/or statutory obligations may impose prohibitions or severe restrictions on disposal by sale; 3. Their value may increase over time; and 4. It may be difficult to estimate their useful lives, which in some cases could be several hundred years. Elements and Examples of Intangible Assets 1. Identifiability – separable from the entity and arises from binding arrangements 2. Control over a resource 3. Existence of future economic benefits or service potential Common examples of intangible assets are computer software, patents, copyrights, franchise, motion picture films, trademarks or brand names, licenses, acquired import quotas, lists of users of a service, and relationships with users of a service. Acquisition of Intangible Assets Intangible assets can be acquired (a) by separate purchase or acquisition, (b) as part of a business or entity combination (c) through a non-exchange transaction (d) by exchanges of assets, or (e) by self-creation (internal generation). Intangible Measurement Separate Purchase 1. its purchase price, including import duties and non or Acquisition refundable taxes, after deducting trade discounts and rebates; and 2. any directly attributable cost of preparing the asset for its intended use, such as costs of employee benefits and professional fees arising directly from bringing the asset to its working condition, and costs of testing whether the asset is functioning properly. Entity Combination fair value on the date of acquisition Intangible Measurement Non-Exchange fair value at the date it is acquired Transactions Exchanges of Assets fair value unless the fair value of neither the asset received nor the asset given up is reliably measurable If the acquired asset is not measured at fair value, its cost is measured at the carrying amount of the asset given up. Intangible Measurement Internally-generated Classify first the generation of the asset into: (a) research phase - expensed; and (b) development phase. Internally-generated Intangible Recognized if, and only if, an entity can demonstrate all of the following: i. The technical feasibility of completing the intangible asset so that it will be available for use or sale; ii. Its intention to complete the intangible asset and use or sell it; iii. Its ability to use or sell the intangible asset; iv. How the intangible asset will generate probable future economic benefits or service potential. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; v. The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and vi. Its ability to measure reliably the expenditure attributable to the intangible asset during its development. (Par. 55, PPSAS 31)  PPE Government Accounting PPE are tangible assets that are: 1. purchased, constructed, developed or otherwise acquired; 2. held for use in the production or supply of goods or services or to produce program outputs; 3. for rental to others; 4. for administrative purposes; 5. expected to be used during more than one reporting period; and 6. not intended for resale in the ordinary course of operations. Applying the Capitalization Threshold of P15,000 The capitalization threshold of P15,000 represents the minimum cost of an individual asset recognized as a PPE on the Statement of Financial Position Exc: 1. Group of network asset 2. Bulk acquisition