...COMPANIES 5 Disclosures on Intangible Assets 5 Compliance with AASB 138, Paragraphs 118 to 123 and 126 to 128 6 Differences in Disclosures Between the Two Companies 7 RECOMMENDATIONS 9 LIST OF REFERENCES 10 APPENDICES 11 Appendix A – Cervantes Corporation Ltd. – Consolidated Statement of Financial Position 11 Appendix B – Cervantes Corporation Ltd. – Note 1 (i) 11 Appendix C – Cervantes Corporation Ltd. – Note 13 12 Appendix D – Clean Seas Tuna Limited – Consolidated Statement of Financial Position 12 Appendix E – Clean Seas Tuna Limited – Note 1 (e) 13 Appendix F – Clean Seas Tuna Limited – Note 18, part 1 13 Appendix G – Clean Seas Tuna Limited – Note 18, part 2 14 Appendix H – Clean Seas Tuna Limited – Note 18, part 3 15 Appendix I – Clean Seas Tuna Limited – Note 18, part 4 15 EXECUTIVE SUMMARY This research-based case study and report aims to review the disclosure requirements for intangible assets in an attempt to improve the quality of financial reporting. The study was based on the comparison of the disclosures for the intangible assets of two Australian Securities Exchange listed companies from the same industry, using their latest annual reports. The selected companies are Cervantes Corporation Ltd. and Clean Seas Tuna Limited, both participating in the aquaculture industry. The comparison was done by evaluating individual Notes to the Financial Statements as of June 30, 2012, noting all the disclosures presented for intangible assets and determining compliance...
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...9 INTANGIBLE ASSETS PERSPECTIVE AND ISSUES Long-lived assets are those that will provide economic benefits to an enterprise for a number of future periods. Accounting standards regarding long-lived assets involve determination of the appropriate cost at which to record the assets initially, the amount at which to present the assets at subsequent reporting dates, and the appropriate method(s) to be used to allocate the cost or other recorded values over the periods being benefited. Under international accounting standards, while historical cost is the defined benchmark treatment, revalued amounts may also be used for presenting long-lived assets in the statement of financial position if certain conditions are met. Long-lived assets are primarily operational in character, and they may be classified into two basic types: tangible and intangible. Tangible assets have physical substance, while intangible assets either have no physical substance, or have a value that is not conveyed by what physical substance they do have (e.g., the value of computer software is not reasonably measured with reference to the cost of the diskettes on which these are contained). The value of an intangible asset is a function of the rights or privileges that its ownership conveys to the business enterprise. Intangible assets can be further categorized as either 1. Identifiable, or 2. Unidentifiable (i.e., goodwill). Identifiable intangibles include patents, copyrights, brand names, customer...
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...Introduction A study conducted by an independent accounting firm revealed that intangible assets account for 80% of the S&P 500’s total value (Nearon, 2008). This study researched United States (US) companies’ and indicated 40% of market value is not reflected in their balance sheet (Nearon, 2008). This decline in market value has led to strong arguments for rethinking the measurement and treatment for intangibles assets. International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) have created significant differences in the accounting treatment of intangible assets. Both IFRS and GAAP view intangible assets as a non-monetary asset that do not have physical substance but can be identified. This paper will review the similarities and differences within GAAP and IFRS regarding the following: intangible asset impairments, research and development (R&D), advertising cost, and goodwill impairment. Intangible Asset Impairment Testing IFRS and GAAP contain similar indicators for testing impairment of intangible assets. Differences arise in testing, recognition and presentation. GAAP requires a two-step impairment test for intangible assets. Step one requires companies to determine if the carrying amount of the assets exceeds undiscounted future cash flows. If it meets this requirement, step two can be used to calculate the necessary impairment loss. An impairment loss is measured as the difference between the carrying amount...
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...balance sheet, somewhere between the 'Current Assets' and 'Current Liabilities' sections is a collection of long-lived, revenue-producing assets broken up into two categories - 'Property, Plant, and Equipment' (PP&E) and 'Intangible Assets'. PP&E often contains such non-current assets as land and buildings, motor vehicles, office equipment, computers, and plant and machinery. Intangible Assets is a much broader category including anything from copyrights and patents to trade secrets, customer lists/leads, noncompetition agreements, franchises, and goodwill. The accounting methods for PP&E is very similar to those of Current Assets, though there are significant differences in the costs to be capitalized according to GAAP (the "generally accepted accounting princiapals" as determined by the Financial Accounting Standards Board, or FASB). Accounting for Intangible assets can be much more difficult, though – often, there are different rules for amortization, valuation, and estimation. For instance, there is much more uncertainty associated with intangible assets, so it’s much more difficult to account for the projected future benefits. According to the Spiceland text, “it’s often very difficult to anticipate the timing, and even the existence, of future benefits attributable to many intangible assets…in fact, this uncertainty is a discrimintating characteristic of intangible assets that perhaps better distinguishes them from tangible assets than their lack of physical subtance,”...
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...of Calcutta.) A Survey on Accounting & Reporting of Intangible Assets in some selected Indian companies Submitted by Name: MAITREYEE MUKHERJEE Registration no: 043-1221-0272-10 Roll no: Name of the college: Heramba Chandra College. Supervised by Name of the supervisor: JAYANTA GHOSH Name of the college: Heramba Chandra College. BACKGROUND: In 1494, a mathematically minded Veteran monk named Luca Pacioli published his “Summa de Arithmetica, Geometrica”, the first accounting textbook. It illustrated double-entry accounting, a system that makes the modern corporation manageable, even possible. Today, half a millennium later, Pacioli’s process, still pretty much intact, is being challenged like never before. Pacioli’s accounting system lets businesses keep track of changes in their assets. But this system deals primarily with tangible assets such as cash, inventory, investments, receivables, property, plant, and equipment. What go unrecorded are intangible assets such as quality of management, customer loyalty, information infrastructure, trade secrets, patents, goodwill, research, and, considered by some, the ultimate intangible, knowledge—a company’s intellectual capital. FASB chairman Edmund...
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...Assignment on Intangible assets: Intangible assets are assets that lack physical existence and are not financial instruments. Intangible assets are usually classified as concurrent (long-term) assets because they produce benefits over several years. They are valuable because they provide rights and privileges to their owners. Examples of intangible assets are: trademarks, copyrights, patents, franchises, customer lists, and goodwill. Intangible assets have the following classifications: 1. Purchased vs. internally created intangibles 2. Limited-life vs. indefinite-life intangibles ← Purchased intangibles are recorded at the cost incurred to purchase an intangible asset from another entity, which includes the acquisition costs as well as expenditures made to get the asset ready for its intended use (e.g. legal fees). ← Internally created intangibles are often not recorded on the balance sheet: most costs incurred to internally develop an intangible asset have to be expensed (including Research and Development costs), and only certain costs (e.g. legal costs) might be capitalized (e.g. debit Patent for the cost of defending the patent). ← Limited-life intangibles are intangible assets with a limited useful life (e.g. copyrights, patents). Limited-life intangibles are systemically amortized throughout the useful life of the intangible asset using either units of activity method or straight-line method. The amortization amount equals the different between...
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...Intangible assets- practical approach An asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today's marketplace. An intangible asset can be classified as either indefinite or definite depending on the specifics of that asset. A company brand name is considered to be an indefinite asset, as it stays with the company as long as the company continues operations. However, if a company enters a legal agreement to operate under another company's patent, with no plans of extending the agreement, it would have a limited life and would be classified as a definite asset. While intangible assets don't have the obvious physical value of a factory or equipment, they can prove very valuable for a firm and can be critical to its long-term success or failure. During the past years, attention was brought to companies that are based only on intangibles, such a company is Amazon but also big companies that relied mostly on manufacturing goods, started paying more attention to intangibles. Oracle is an American multinational computer technology corporation headquartered in Redwood City, California, United States. The company specializes in developing and marketing computer hardware systems and enterprise software products – particularly its own brands of database management systems. Oracle is the third-largest software maker by revenue...
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...Investing Cycle Transactions * represent the purchase and sale of land, buildings, equipment, and other assets not generally held for resale. In addition, investing activities include the purchase and sale of financial instruments not intended for trading purposes . * concerned with transactions related to the use of the organization's funds other than operation * Accounts affected by investing cycle transactions include 1. non-trade accounts receivable 2. investments in securities; 3. Property, plant and equipment 4. Accumulated depreciation 5. Intangibles and other assets 6. Cash in bank Documents and Records 1. STOCK CERTIFICATE- an engraved form showing the number of shares of stock owned by a shareholder in a corporation. This document provides evidence for existence or occurence assertion. 2. BOND CERTIFICATE- an engraved form showing the number of bonds owned by a bondholder. 3. BROKER'S ADVICE- a document issued by a broker specifying the exchange price of investing transactions. It is the primary source document for recording investing transactions. The advice provides evidence for the valuation or allocaton assertion. 4. BROKER'S STATEMENT- a monthly statement issued by a broker specifying securities held in safekeeping by the broker, their cost and their fair market value at the end of the month. In addition, the monthly statement usually summarizes any transactions that took place during the month. 5. BOOKS OF ORIGINAL...
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...are so major that it keeps a consistent debate on which system is more appropriate for accounting purposes. The reporting of intangible assets is one such area where they are some similarities in using the guidelines of iGAAP or U.S. GAAP but they also have some significant differences between the two with respect to accounting for intangible assets. The system differences are so major that it quite constantly rises up debates. "It is unlikely that this debate will cease since the fair value accounting practices are endorsed both by the Financial Accounting Standard Board (FASB) and International Accounting Standard Board (IASB)." (Uzma, 2001 pg. 28-38) Intangible assets are considered to be corporate intellectual property which includes patents, copyrights, trademarks, trade names, franchise licenses, government licenses and goodwill. The main characteristics of intangible assets are that they are not of physical existence and they are not monetary instruments, but they are classified as long-term assets and provide long-term benefits. Intangible assets are presented in the balance sheet as value holding and/or cash generating patents, trademarks, licenses, copyrights, etc. Certain companies in certain industries such as music, drug and consumer products industries find it vitally important to report intangible assets. There are four major similarities in U.S. GAAP and iGAAP in accounting for...
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...Intangible Assets A. Classification--intangible assets are assets that derive their value from the rights and privileges granted to their owner, are long-term in nature, and lack physical substance B. Valuation 1. Cost--cost is the cash or cash equivalent price of obtaining the intangible asset and making it ready for its intended use a. Purchased Intangibles--the cost of a purchased intangible asset is determined in essentially the same way as the cost of property, plant, and equipment b. Internally-created Intangibles--the cost of an internally-created intangible asset includes only the direct costs incurred in obtaining the intangible asset, such as legal fees, registration fees, etc. 1) Research and Development Costs--all research and development costs are expensed when incurred 2. Special Considerations a. Marketing-related Intangible Assets--marketing-related intangible assets are those intangible assets that are used in the marketing or promotion of products or services (such as trademarks or trade names, newspaper mastheads, internet domain names, and noncompetition agreements) 1) Purchased Intangibles--the capitalizable cost of a purchased marketing-related intangible asset is its purchase price plus any...
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...IAS 38 Intangible Assets outlines the accounting treatments for intangible assets. An intangible asset is defined as identifiable non-monetary asset that has no physical form which is controlled by the entity and is expected to generate future economic benefits (Jaroslav and Alois, n.d.) . The definition of assets has identified 3 key characteristics. Firstly, the intangible asset has to be identifiable. The controlled airspace met the identifiable criterion as it arises from legal rights. According to Gray (n.d.), airspace should be a free territory and has a status of ‘no-man's land’. However, CAA has been given the rights by the federal government to undertake all aviation related functions. CAA issue license which the aircraft must have to pay for the license in order to utilize the airspace. Secondly, an intangible asset has to provide future economic benefits, which mean there should be cash flow whether directly or indirectly, to the entity. To achieve this goal, the entity has to employ its assets to produce goods and service to create value and benefits in order to satisfy customers’ needs and wants. The controlled airspace (CAS) established has value that is able to satisfy the needs and wants of customers as the purpose of CAS is to protect the aircraft during various phases of flight. It provides efficient flow of traffic besides facilitate a safe flight (Civil Aviation Authority, n.d.). According to Civil Aviation Authority (n.d.), the aircraft must be in receipt...
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...E12-1 (Classification Issues—Intangibles) Presented below is a list of items that could be included in the intangible assets section of the balance sheet. Instructions (a) Indicate which items on the list would generally be reported as intangible assets in the balance sheet. (b) Indicate how, if at all, the items not reportable as intangible assets would be reported in the financial statements. 1. Investment in a subsidiary company. 2. Timberland. 3. Cost of engineering activity required to advance the design of a product to the manufacturing stage. 4. Lease prepayment (6 months’ rent paid in advance). 5. Cost of equipment obtained. 6. Cost of searching for applications of new research findings. 7. Costs incurred in the formation of a corporation. 8. Operating losses incurred in the start-up of a business. 9. Training costs incurred in start-up of new operation. 10. Purchase cost of a franchise. 11. Goodwill generated internally. 12. Cost of testing in search for product alternatives. 13. Goodwill acquired in the purchase of a business. 14. Cost of developing a patent. 15. Cost of purchasing a patent from an inventor. 16. Legal costs incurred in securing a patent. 17. Unrecovered costs of a successful legal suit to protect the patent. 18. Cost of conceptual formulation of possible product alternatives. 19. Cost of purchasing a copyright. 20. Research and development costs. 21. Long-term receivables. 22. Cost of developing a trademark...
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...the Informational Age. The world has transfused from an age based largely on manpower to an age based on brainpower. This brainpower is cannot be quantified but it can be categorized as a companies intangible assets. This means that over the years the market value that was related to tangible assets has decreased and there has been an increase in intangible assets. The percent of market value related to tangible assets in 1982 was about 62 percent, and the intangible assets were made up of about 38 percent. Then in 2000, we could see a significant transformation towards intangibles. There was only 15 percent of market value associated with tangible, while 85 percent was tied to intangibles (Ulrich, Smallwood, 2003). This pattern shows how the world has changed in terms of where the actual assets of a company are held. The value of tangible assets has significantly decreased relative to the intangible assets. These assets include, but are limited to, assets like intellectual property or capital, brand name, and innovative thoughts. The main thing that causes these intangibles to exist is the ability a company has in attracting talent. So now that we have seen this transformation from tangibles to intangibles we should understand how intangible effect a company. These intangible assets are directly affecting how well a company performs. Thus a company needs to focus on its talent, while at the same time, press on with its core business to stay competitive with others companies....
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...Goodwill: Apple, Inc. tests their goodwill and intangible assets for impairment at minimum, annually. They may even sooner depending on when the events of changes in circumstances show that these assets may be impaired. Therefore, Apple does not amortize their goodwill and intangible assets with indefinite useful lives. Intangible assets with definite useful lives are amortized over a period of their useful lives, and after are reviewed for impairment. Currently, Apple’s acquired intangible assets with definite lives are being amortized, over periods of three to ten years. The Company established their methods of reporting used based on their reporting structure that they have in place currently. When testing goodwill and impairment, Apple allocates these reporting units to the extent in which it relates to each of the reporting units. Samsung discloses their goodwill by representing the excess of the cost of an acquisition over the fair value of the group’s share of net identifiable assets of the acquired subsidiary at the date of acquisition. However, if the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, then the difference is recognized directly to the income statement. Goodwill on acquisitions of subsidiaries is reported under intangible assets. Samsung deals with their goodwill by testing it annually for impairment and carried at cost less accumulated impairment losses. If there is any change in events that indicates a possible...
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...38: INTANGIBLES 1. Define an “intangible asset”. (1 Mark) 2. Define an “active market”. (1 Mark) 3. Define “research”.(1 Mark) 4. Define “development”. (1 Mark) 5. When does an asset meet the identifiability criterion? (1 Mark) 6. When should an intangible asset be recognised? (1 Mark) 7. How should an intangible asset be measured initially? (1 Mark) 8. How should internally generated goodwill be accounted for? (1 mark) 9. Name two (2) of the criteria that must be met if an intangible asset arising from the development phase is to be recognised? (1 Mark) 10. To assess whether outlays internally generated intangible asset meets the criteria for recognition, an entity classifies the generation of the asset into one of two phases. Name these phases. (1 Mark) 11. How is an internally generated intangible asset arising from the research phase accounted for? (1 Mark) 12. How is an internally generated asset arising from the development phase accounted for? (1 mark) 13. Subsequent to initial recognition how is an internally generated intangible asset measured? (1 Mark) 14. Over what period of time is an internally generated intangible asset amortised? (1 Mark) 15. Which recognition criterion is always considered to be satisfied when accounting for the acquisition of a separate intangible asset? (1 Mark) 16. Why is the probability criterion always considered to be satisfied when accounting for the acquisition of a separate intangible asset...
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