i. Define an Intangible Asset under IAS 38: Intangible Assets.

An intangible asset is an identifiable non-monetary asset without physical substance that is controlled by the entity and from which future economic benefits are expected to flow. It must be identifiable, either separable or arising from legal rights.

ii. Explain the Recognition Criteria for Intangible Assets.

An intangible asset is recognized if:

• It is probable that the expected future economic benefits attributable to the asset will flow to the entity.
• The cost of the asset can be measured reliably.

For internally generated assets, the recognition is more restrictive, with separate criteria for research and development phases.

iii. State five (5) Disclosure Requirements of Intangible Assets under IAS 38.

1. The useful lives, amortization rates, and amortization methods used.
2. The gross carrying amount and accumulated amortization and impairment losses at the beginning and end of the period.
3. Additions, disposals, increases or decreases due to revaluations, impairment losses, and reversals.
4. The line item in the statement of profit or loss where amortization is included.
5. Whether the useful life is indefinite, and if so, the carrying amount and reasons for indefinite life.

iv. Explain the meaning of the terms Research Expenditure and Development Expenditure.

Research Expenditure is the cost of original and planned investigation undertaken to gain new scientific or technical knowledge and understanding, without a specific commercial aim, such as basic research or feasibility studies.

Development Expenditure is the cost of applying research findings to a plan or design for producing new or improved products, processes, or services, with a specific commercial objective, such as prototype design or pilot testing.

v. Explain the conditions applied to Research and Development Expenditure, according to IAS 38, to determine whether or not the cost should be capitalised.

Research expenditure is always expensed as incurred, as future benefits are not probable.

Development expenditure is capitalised only if all the following conditions are met:

• The technical feasibility of completing the asset for use or sale.
• Intention to complete and use or sell the asset.
• Ability to use or sell the asset.
• Probable future economic benefits (e.g., market existence or internal use usefulness).
• Availability of adequate resources to complete development.
• Reliable measurement of development costs.

If not, expense the costs.