CIMA F2 Syllabus B. Financial reporting standards - Intangible Assets - Future Measurement - Notes ^{3 / 4}

Historic Cost (and amortise)

Generally intangible assets should be amortised over their useful economic life.

1. If has a useful economic life

   Amortise over UEL

   Residual values should be assumed to be nil, except in the rare circumstances when an active market exists or there is a commitment by a third party to purchase the asset at the end of its useful life.

2. If has an indefinite UEL

   Check for impairment every year

   There should also be an annual review to see if the indefinite life assessment is still appropriate.

Revaluation (and amortise)

This model can only be adopted if an active market exists for that type of asset.

Revaluing Intangibles is hard, because there is no physical substance, and so a reliable measure is tricky.

1. There MUST be an active market

2. The item MUST be NOT unique

So what’s an ‘active market’?

• Firstly I should mention that these are rare, but may exist for certain licences and production quotas

• These, though, are markets where the products are unique, always trading and prices available to public

Examples where they might exist:

1. Milk quotas

2. Stock exchange seats

3. Taxi medallions

These two tests make it very difficult for any intangibles to be revalued so the historic cost choice is by far the most common.

If the revaluation model is adopted, revaluation surpluses and deficits are accounted for in the same way as those for PPE