In that case an entity should, record both the grant and the intangible asset at fair valueĪs per AS 26, intangible assets is recognised at nominal value or at acquisition cost
Amortization software free free#
Intangible Assets acquired Free of Charge or for a Nominal Consideration by way of Government Grant Principles of AS 10 to be followed which require Fair market value at the time of consideration Ind AS 38 requires that if an intangible asset is acquired in exchange of a non-monetary asset, it should be recognised at the fair value of the asset Ind AS 38 gives guidance for the treatment of such expenditureĪS 26 is silent regarding the treatment of subsequent expenditure Subsequent Expenditure on in Process Project Ind AS 38 deals in detail in respect of intangible assets acquired in a business combinationĪS 26 refers only to intangible assets acquired in an amalgamation in the nature of purchase Intangible assets acquired in Business Combination Ind AS 38 allows use of revenue based method of amortisation of intangible asset, in a limited way In this case, the criterion of probable inflow of expected future economic benefits is always considered satisfied, even if there is any uncertainty The requirement of definition given by AS 26 has been removed from the definitionĪS 26 defines an intangible asset as an identifiable non-monetary asset without physical substance held for use in the production or supply of goods or services, for rental to others, or for administrative purposes Cost incurred from the point of technological feasibility/asset recognition criteria until the time when products costs are incurred are capitalized as software cost (40,000 + 10,000 + 15,000) = 65000 Significant Differences in IND AS 38 and AS 26 S.No. What amount should be capitalized as software costs, on Balance Sheet date? As per AS 26, costs incurred in creating the software product should be charged to research and development expense when incurred until technological feasibility/asset recognition criteria has been established, that criteria have been established upon completion of detailed programme design or working model. Example An enterprise incurred costs to develop and produce a software product during 2017-18, as follows:Ĭompletion of detailed programme and design Retirements and Disposals An intangible asset should be derecognized on disposal or when no future economic benefits are expected from its use, any gain and loss (difference between the net disposal proceeds and the carrying amount of the asset) arising should be recognized as income or expenses in statement of P & L. In some cases, it would be longer than ten years. This AS adopts a presumption that the useful life of intangible assets does not exceed ten years. The depreciable amount of an intangible asset should be allocated on the basis of useful life. Amortization Period Amortization should start when the asset is available for use.
Initial and subsequent expenditure Expenditure on an intangible item should be recognized as an expense when it is incurred, Subsequent expenditure (after purchase or completion of assets) should be added to the cost of the intangible asset, when there is a probability that the expenditure will generate future economic benefits and the expenditure can be measured reliably. The cost of an internally generated intangible asset includes all direct expenditures related to creating, producing and making the asset ready for its intended usage from the time it meets the first recognition criteria. When the asset is acquired free of charge or for a normal consideration, by way of government grant, then it is recognized at a nominal value or at the acquisition cost. If an asset is acquired in a business combination, the cost of that asset should be its fair value at the acquisition date which depends on market expectations.
Note: If an intangible asset is acquired separately, that should be measured initially at cost, which includes purchase price that includes import duty, non-refundable purchase taxes, after deducting trade discount and related direct cost. These recognition criteria applies to cost of acquiring and generating an intangible asset internally. Recognition and Initial Measurement of an Intangible Assets It applies when an item meets the criteria of an Intangible asset and it is probable that the future economic benefits will flow to the enterprise and the cost of the asset can be measured reliably. Significant Differences in IND AS 38 and AS 26.Recognition and Initial Measurement of an Intangible Assets.We will cover the following topics in this article:
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