AASB 138 Intangible Assets

AASB 138 Intangible Assets

AASB 138 Intangible Assets, requires that an intangible asset must be identifiable to distinguish it from goodwill.

Identification

An intangible asset is identifiable if it is either (Appendix G, paragraph 12):

• separable, i.e. it is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so; or,
• arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

Recognition

Per AASB 138 an intangible asset is recognised if, and only if:

• it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
• the cost of the asset can be measured reliably.

Goodwill and the assembled workforce

Per AASB 3 goodwill is recognised at the time of acquisitions as the consideration transferred; less,the net of acquisition-date amounts of the identifiable assets acquired and liabilities assumed.

The acquirer subsumes into goodwill the value of an acquired intangible asset that is not identifiable as of the acquisition date. Goodwill may include, for example, synergies from combining the operations of the acquiree and acquirer

An acquirer may attribute value to the existence of an assembled workforce, which is an existing collection of employees that permits the acquirer to continue to operate an acquired business from the acquisition date.

An assembled workforce, however, per AASB 3 does not represent the intellectual capital of the skilled workforce and is not an identifiable asset to be recognised separately from goodwill.

Fair value

In accordance with AASB 3 Business Combinations, if an intangible asset is acquired in a business combination, the cost of that intangible asset is its Fair Value at the acquisition date.

The Fair Value of an intangible asset reflect market participants’ expectations at the acquisition date about the probability that the expected future economic benefits embodied in the asset will flow to the entity.

Intellectual property valuations

This requires an assessment of the probability of expected future economic benefits using reasonable and supportable assumptions that represent a best estimate of the set of economic conditions that will exist over the useful life of the asset.