TaxTMI 
TaxTMI 
Intangible Assets
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....d Evaluation of Mineral Resources); and (d) expenditure on the development and extraction of minerals, oil, natural gas and similar non-regenerative resources. 3 If another Standard prescribes the accounting for a specific type of intangible asset, an entity applies that Standard instead of this Standard. For example, this Standard does not apply to: ^8[(a) intangible assets held by an entity for sale in the ordinary course of business (see Ind AS 2, Inventories).] (b) deferred tax assets (see Ind AS 12, Income Taxes). ^20[(c) leases of intangible assets accounted for in accordance with Ind AS 116, Leases.] (d) assets arising from employee benefits (see Ind AS 19, Employee Benefits). (e) financial assets as defined in Ind AS 32. The recognition and measurement of some financial assets are covered by Ind AS 110, Consolidated Financial Statements, Ind AS 27, Separate Financial Statements, and Ind AS 28, Investments in Associates and Joint Ventures. (f) goodwill acquired in a business combination (see Ind AS 103, Business Combinations). ^28[(g) contracts within the scope of Ind AS 117, Insurance Contracts....
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....case of insurance contracts. Therefore, this Standard does not apply to expenditure on such activities and contracts. However, this Standard applies to other intangible assets used (such as computer software), and other expenditure incurred (such as start-up costs), in extractive industries or by insurers. 7AA The amortisation method specified in this Standard does not apply to an entity that opts to amortise the intangible assets arising from service concession arrangements in respect of toll roads recognised in the financial statements for the period ending immediately before the beginning of the first Ind AS reporting period as per the exception given in paragraph D22 of Appendix D to Ind AS 101. Definitions 8 The following terms are used in this Standard with the meanings specified: Amortisation is the systematic allocation of the depreciable amount of an intangible asset over its useful life. An asset* is a resource: (a) controlled by an entity as a result of past events; and (b) from which future economic benefits are expected to flow to the entity. Carrying amount is the amount at which an asset is recognised in the balance sheet after ded....
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....ntific or technical knowledge, design and implementation of new processes or systems, licences, intellectual property, market knowledge and trademarks (including brand names and publishing titles). Common examples of items encompassed by these broad headings are computer software, patents, copyrights, motion picture films, customer lists, mortgage servicing rights, fishing licences, import quotas, franchises, customer or supplier relationships, customer loyalty, market share and marketing rights. 10 Not all the items described in paragraph 9 meet the definition of an intangible asset, ie identifiability, control over a resource and existence of future economic benefits. If an item within the scope of this Standard does not meet the definition of an intangible asset, expenditure to acquire it or generate it internally is recognised as an expense when it is incurred. However, if the item is acquired in a business combination, it forms part of the goodwill recognised at the acquisition date (see paragraph 68). Identifiability 11 The definition of an intangible asset requires an intangible asset to be identifiable to distinguish it from goodwill. Goodwill recognised in a busin....
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.... asset, unless it is protected by legal rights to use it and to obtain the future economic benefits expected from it, and it also meets the other parts of the definition. 16 An entity may have a portfolio of customers or a market share and expect that, because of its efforts in building customer relationships and loyalty, the customers will continue to trade with the entity. However, in the absence of legal rights to protect, or other ways to control, the relationships with customers or the loyalty of the customers to the entity, the entity usually has insufficient control over the expected economic benefits from customer relationships and loyalty for such items (eg portfolio of customers, market shares, customer relationships and customer loyalty) to meet the definition of intangible assets. In the absence of legal rights to protect customer relationships, exchange transactions for the same or similar non-contractual customer relationships (other than as part of a business combination) provide evidence that the entity is nonetheless able to control the expected future economic benefits flowing from the customer relationships. Because such exchange transactions also provide evid....
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....eads, publishing titles, customer lists and items similar in substance (whether externally acquired or internally generated) is always recognised in profit or loss as incurred. This is because such expenditure cannot be distinguished from expenditure to develop the business as a whole. 21 An intangible asset shall be recognised if, and only if: (a) it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and (b) the cost of the asset can be measured reliably. 22 An entity shall assess the probability of expected future economic benefits using reasonable and supportable assumptions that represent management's best estimate of the set of economic conditions that will exist over the useful life of the asset. 23 An entity uses judgement to assess the degree of certainty attached to the flow of future economic benefits that are attributable to the use of the asset on the basis of the evidence available at the time of initial recognition, giving greater weight to external evidence. 24 An intangible asset shall be measured initially at cost. Separate acquisition 25 Normally, the price an entit....
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....set's output builds up. 31 Some operations occur in connection with the development of an intangible asset, but are not necessary to bring the asset to the condition necessary for it to be capable of operating in the manner intended by management. These incidental operations may occur before or during the development activities. Because incidental operations are not necessary to bring an asset to the condition necessary for it to be capable of operating in the manner intended by management, the income and related expenses of incidental operations are recognised immediately in profit or loss, and included in their respective classifications of income and expense. 32 If payment for an intangible asset is deferred beyond normal credit terms, its cost is the cash price equivalent. The difference between this amount and the total payments is recognised as interest expense over the period of credit unless it is capitalised in accordance with Ind AS 23, Borrowing Costs. Acquisition as part of a business combination 33 In accordance with Ind AS 103, Business Combinations, if an intangible asset is acquired in a business combination, the cost of that intangible asset is its fair....
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....e acquirer may recognise a group of complementary intangible assets as a single asset provided the individual assets have similar useful lives. For example, the terms 'brand' and 'brand name' are often used as synonym for trademarks and other marks. However, the former are general marketing terms that are typically used to refer to a group of complimentary assets such as a trademark (or service mark) and its related trade name, formulas, recipes and technological expertise. 38 - 41 [Refer Appendix 1] Subsequent expenditure on an acquired in-process research and development project 42 Research or development expenditure that: (a) relates to an in-process research or development project acquired separately or in a business combination and recognised as an intangible asset; and (b) is incurred after the acquisition of that project shall be accounted for in accordance with paragraphs 54-62. 43 Applying the requirements in paragraphs 54-62 means that subsequent expenditure on an in-process research or development project acquired separately or in a business combination and recognised as an intangible asset is: (a) recognised as an expense when i....
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.... (ie risk, timing and amount) of the cash flows of the asset received differs from the configuration of the cash flows of the asset transferred; or (b) the entity-specific value of the portion of the entity's operations affected by the transaction changes as a result of the exchange; and (c) the difference in (a) or (b) is significant relative to the fair value of the assets exchanged. For the purpose of determining whether an exchange transaction has commercial substance, the entity-specific value of the portion of the entity's operations affected by the transaction shall reflect post-tax cash flows. The result of these analyses may be clear without an entity having to perform detailed calculations. 47 Paragraph 21(b) specifies that a condition for the recognition of an intangible asset is that the cost of the asset can be measured reliably. The fair value of an intangible asset is reliably measurable if (a) the variability in the range of reasonable fair value measurements is not significant for that asset or (b) the probabilities of the various estimates within the range can be reasonably assessed and used when measuring fair value. If an entity is able t....
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.... entity cannot distinguish the research phase from the development phase of an internal project to create an intangible asset, the entity treats the expenditure on that project as if it were incurred in the research phase only. Research phase 54 No intangible asset arising from research (or from the research phase of an internal project) shall be recognised. Expenditure on research (or on the research phase of an internal project) shall be recognised as an expense when it is incurred. 55 In the research phase of an internal project, an entity cannot demonstrate that an intangible asset exists that will generate probable future economic benefits. Therefore, this expenditure is recognised as an expense when it is incurred. 56 Examples of research activities are: (a) activities aimed at obtaining new knowledge; (b) the search for, evaluation and final selection of, applications of research findings or other knowledge; (c) the search for alternatives for materials, devices, products, processes, systems or services; and (d) the formulation, design, evaluation and final selection of possible alternatives for new or improved materials, devic....
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....asset can be demonstrated by, for example, a business plan showing the technical, financial and other resources needed and the entity's ability to secure those resources. In some cases, an entity demonstrates the availability of external finance by obtaining a lender's indication of its willingness to fund the plan. 62 An entity's costing systems can often measure reliably the cost of generating an intangible asset internally, such as salary and other expenditure incurred in securing copyrights or licences or developing computer software. 63 Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance shall not be recognised as intangible assets. 64 Expenditure on internally generated brands, mastheads, publishing titles, customer lists and items similar in substance cannot be distinguished from the cost of developing the business as a whole. Therefore, such items are not recognised as intangible assets. Cost of an internally generated intangible asset 65 The cost of an internally generated intangible asset for the purpose of paragraph 24 is the sum of expenditure incurred from the date when the intangible asset first meets....
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.... During 20X6, expenditure incurred is Rs. 2,000. At the end of 20X6, the recoverable amount of the know-how embodied in the process (including future cash outflows to complete the process before it is available for use) is estimated to be Rs. 1,900. At the end of 20X6, the cost of the production process is Rs. 2,100 (Rs.100 expenditure recognised at the end of 20X5 plus Rs. 2,000 expenditure recognised in 20X6). The entity recognises an impairment loss of Rs. 200 to adjust the carrying amount of the process before impairment loss (Rs.2,100) to its recoverable amount (Rs.1,900). This impairment loss will be reversed in a subsequent period if the requirements for the reversal of an impairment loss in Ind AS 36 are met. Recognition of an expense 68 Expenditure on an intangible item shall be recognised as an expense when it is incurred unless: (a) it forms part of the cost of an intangible asset that meets the recognition criteria (see paragraphs 18-67); or (b) the item is acquired in a business combination and cannot be recognised as an intangible asset. If this is the case, it forms part of the amount recognised as goodwill at the acquisition date (see Ind ....
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.... item that was initially recognised as an expense shall not be recognised as part of the cost of an intangible asset at a later date. Measurement after recognition 72 An entity shall choose either the cost model in paragraph 74 or the revaluation model in paragraph 75 as its accounting policy. If an intangible asset is accounted for using the revaluation model, all the other assets in its class shall also be accounted for using the same model, unless there is no active market for those assets. 73 A class of intangible assets is a grouping of assets of a similar nature and use in an entity's operations. The items within a class of intangible assets are revalued simultaneously to avoid selective revaluation of assets and the reporting of amounts in the financial statements representing a mixture of costs and values as at different dates. Cost model 74 After initial recognition, an intangible asset shall be carried at its cost less any accumulated amortisation and any accumulated impairment losses. Revaluation model 75 After initial recognition, an intangible asset shall be carried at a revalued amount, being its fair value at the date of the revaluation less any ....
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....s revalued, the carrying amount of that asset is adjusted to the revalued amount. At the date of the revaluation, the asset is treated in one of the following ways: (a) the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. For example, the gross carrying amount may be restated by reference to observable market data or it may be restated proportionately to the change in the carrying amount. The accumulated amortisation at the date of the revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses; or (b) the accumulated amortisation is eliminated against the gross carrying amount of the asset. The amount of the adjustment of accumulated amortisation forms part of the increase or decrease in the carrying amount that is accounted for in accordance with paragraphs 85 and 86. 81 If an intangible asset in a class of revalued intangible assets cannot be revalued because there is no active market for this asset, the asset shall be carried at its cost less any accumulated amortisati....
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.... life. An intangible asset shall be regarded by the entity as having an indefinite useful life when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity. 89 The accounting for an intangible asset is based on its useful life. An intangible asset with a finite useful life is amortised (see paragraphs 97-106), and an intangible asset with an indefinite useful life is not (see paragraphs 107-110). 90 Many factors are considered in determining the useful life of an intangible asset, including: (a) the expected usage of the asset by the entity and whether the asset could be managed efficiently by another management team; (b) typical product life cycles for the asset and public information on estimates of useful lives of similar assets that are used in a similar way; (c) technical, technological, commercial or other types of obsolescence; (d) the stability of the industry in which the asset operates and changes in the market demand for the products or services output from the asset; (e) expected actions by competitors ....
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....ractual period of the contract in which the right was granted and shall not include renewal periods. 95 There may be both economic and legal factors influencing the useful life of an intangible asset. Economic factors determine the period over which future economic benefits will be received by the entity. Legal factors may restrict the period over which the entity controls access to these benefits. The useful life is the shorter of the periods determined by these factors. 96 Existence of the following factors, among others, indicates that an entity would be able to renew the contractual or other legal rights without significant cost: (a) there is evidence, possibly based on experience, that the contractual or other legal rights will be renewed. If renewal is contingent upon the consent of a third party, this includes evidence that the third party will give its consent; (b) there is evidence that any conditions necessary to obtain renewal will be satisfied; and (c) the cost to the entity of renewal is not significant when compared with the future economic benefits expected to flow to the entity from renewal. If the cost of renewal is significant w....
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.... affected by inflation, which has no bearing upon the way in which an asset is consumed. This presumption can be overcome only in the limited circumstances: (a) in which the intangible asset is expressed as a measure of revenue, as described in paragraph 98C; or (b) when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. 98B In choosing an appropriate amortisation method in accordance with paragraph 98, an entity could determine the predominant limiting factor that is inherent in the intangible asset. For example, the contract that sets out the entity's rights over its use of an intangible asset might specify the entity's use of the intangible asset as a predetermined number of years (i.e. time), as a number of units produced or as a fixed total amount of revenue to be generated. Identification of such a predominant limiting factor could serve as the starting point for the identification of the appropriate basis of amortisation, but another basis may be applied if it more closely reflects the expected pattern of consumption of economic benefits. 98C In the circumstance in which the ....
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....n entity expects to dispose of the intangible asset before the end of its economic life. 102 An estimate of an asset's residual value is based on the amount recoverable from disposal using prices prevailing at the date of the estimate for the sale of a similar asset that has reached the end of its useful life and has operated under conditions similar to those in which the asset will be used. The residual value is reviewed at least at each financial year-end. A change in the asset's residual value is accounted for as a change in an accounting estimate in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors. 103 The residual value of an intangible asset may increase to an amount equal to or greater than the asset's carrying amount. If it does, the asset's amortisation charge is zero unless and until its residual value subsequently decreases to an amount below the asset's carrying amount. Review of amortisation period and amortisation method 104 The amortisation period and the amortisation method for an intangible asset with a finite useful life shall be reviewed at least at each financial year-end. If the expected useful life of the as....
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....mount as an impairment loss. Recoverability of the carrying amount-impairment losses 111 To determine whether an intangible asset is impaired, an entity applies Ind AS 36. That Standard explains when and how an entity reviews the carrying amount of its assets, how it determines the recoverable amount of an asset and when it recognises or reverses an impairment loss. Retirements and disposals 112 An intangible asset shall be derecognised: (a) on disposal; or (b) when no future economic benefits are expected from its use or disposal. ^22[113 The gain or loss arising from the derecognition of an intangible asset shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the asset. It shall be recognised in profit or loss when the asset is derecognised (unless Ind AS 116 requires otherwise on a sale and leaseback). Gains shall not be classified as revenue. 114 The disposal of an intangible asset may occur in a variety of ways (e.g. by sale, by entering into a finance lease, or by donation). The date of disposal of an intangible asset is the date that the recipient obtains control of that asset in accor....
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....a reconciliation of the carrying amount at the beginning and end of the period showing: (i) additions, indicating separately those from internal development, those acquired separately, and those acquired through business combinations; (ii) assets classified as held for sale or included in a disposal group classified as held for sale in accordance with Ind AS 105 and other disposals; (iii) increases or decreases during the period resulting from revaluations under paragraphs 75, 85 and 86 and from impairment losses recognised or reversed in other comprehensive income in accordance with Ind AS 36 (if any); (iv) impairment losses recognised in profit or loss during the period in accordance with Ind AS 36 (if any); (v) impairment losses reversed in profit or loss during the period in accordance with Ind AS 36 (if any); (vi) any amortisation recognised during the period; (vii) net exchange differences arising on the translation of the financial statements into the presentation currency, and on the translation of a foreign operation into the presentation currency of the entity; and (viii) other changes in the carrying....
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....contractual commitments for the acquisition of intangible assets. 123 When an entity describes the factor(s) that played a significant role in determining that the useful life of an intangible asset is indefinite, the entity considers the list of factors in paragraph 90. Intangible assets measured after recognition using the revaluation model 124 If intangible assets are accounted for at revalued amounts, an entity shall disclose the following: a. by class of intangible assets: (i) the effective date of the revaluation; (ii) the carrying amount of revalued intangible assets; and (iii) the carrying amount that would have been recognised had the revalued class of intangible assets been measured after recognition using the cost model in paragraph 74;and b. the amount of the revaluation surplus that relates to intangible assets at the beginning and end of the period, indicating the changes during the period and any restrictions on the distribution of the balance to shareholders. c. [Refer Appendix 1] 125 It may be necessary to aggregate the classes of revalued assets into larger classes for disclosure purposes. However, ....
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.... designed for internal access may be used to store company policies and customer details, and search relevant information. 2 The stages of a web site's development can be described as follows: (a) Planning - includes undertaking feasibility studies, defining objectives and specifications, evaluating alternatives and selecting preferences. (b) Application and Infrastructure Development - includes obtaining a domain name, purchasing and developing hardware and operating software, installing developed applications and stress testing. (c) Graphical Design Development - includes designing the appearance of web pages. (d) Content Development - includes creating, purchasing, preparing and uploading information, either textual or graphical in nature, on the web site before the completion of the web site's development. This information may either be stored in separate databases that are integrated into (or accessed from) the web site or coded directly into the web pages. 3 Once development of a web site has been completed, the Operating stage begins. During this stage, an entity maintains and enhances the applications, infrastructure, graphical desi....
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.... products and services will generate probable future economic benefits, and consequently all expenditure on developing such a web site shall be recognised as an expense when incurred. 9 Any internal expenditure on the development and operation of an entity's own web site shall be accounted for in accordance with Ind AS 38. The nature of each activity for which expenditure is incurred (eg training employees and maintaining the web site) and the web site's stage of development or post-development shall be evaluated to determine the appropriate accounting treatment. For example: (a) the Planning stage is similar in nature to the research phase in paragraphs 54-56 of Ind AS 38. Expenditure incurred in this stage shall be recognised as an expense when it is incurred. (b) the Application and Infrastructure Development stage, the Graphical Design stage and the Content Development stage, to the extent that content is developed for purposes other than to advertise and promote an entity's own products and services, are similar in nature to the development phase in paragraphs 57-64 of Ind AS 38. Expenditure incurred in these stages shall be included in the cost of a web s....
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.... to Appendix A retrospectively in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors. However, if an entity determines that retrospective application would be impracticable or would involve undue cost or effort, it shall apply the amendment to Appendix A by reference to paragraphs 23-28, 50-53 and 54F of Ind AS 8.]; Appendix B References to matters contained in other Indian Accounting Standards This appendix is an integral part of the Ind AS. This appendix lists the appendices which are part of other Indian Accounting Standards and make reference to Ind AS 38, Intangible Assets. ^14[1 Appendix D, Service Concession Arrangements contained in Ind AS 115, Revenue from Contracts with Customers.] ^15[2 Appendix E, Service Concession Arrangements: Disclosures contained in Ind AS 115, Revenue from Contracts with Customers.] ^25[*******] 4. Appendix B, Stripping Costs in the Production Phase of a Surface Mine, contained in Ind AS 16, Property, Plant and Equipment. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major difference....
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.... - Dated 30-3-2016 before it was read as, " (a) intangible assets held by an entity for sale in the ordinary course of business (see Ind AS 2, Inventories). " 2. Omitted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, " (i) assets arising from contracts with customers that are recognised in accordance with Ind AS 115, Revenue from Contracts with Customers. " 3. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, " 114 The disposal of an intangible asset may occur in a variety of ways (eg by sale, by entering into a finance lease, or by donation). The date of disposal of an intangible asset is the date that the recipient obtains control of that asset in accordance with the requirements for determining when a performance obligation is satisfied in Ind AS 115, Revenue from Contracts with Customers. Ind AS 17 applies to disposal by a sale and leaseback. " 4. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, " 116 The amount of consideration to be included in the gain or loss arising from the derecognition of an intangible asset is determined in accordance with the requir....
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....^4[116 The consideration receivable on disposal of an intangible asset is recognised initially at its fair value. If payment for the intangible asset is deferred, the consideration received is recognised initially at the cash price equivalent. The difference between the nominal amount of the consideration and the cash price equivalent is recognised as interest revenue in accordance with Ind AS 18 reflecting the effective yield on the receivable. ]" 12. Inserted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018 13. Substituted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018, before it was read as, "^5[6 Ind AS 38 does not apply to intangible assets held by an entity for sale in the ordinary course of business (see Ind AS 2 and Ind AS 11) or leases that fall within the scope of Ind AS 17. Accordingly, this Appendix does not apply to expenditure on the development or operation of a web site (or web site software) for sale to another entity. When a web site is leased under an operating lease, the lessor applies this Appendix. When a web site is leased under a finance lease, the lessee applies this A....
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...., IAS 38, Intangible Assets, provides the option to an entity to recognise both asset and grant initially at fair value or at a nominal amount plus any expenditure that is directly attributable to preparing the asset for its intended use. Ind AS 38 allows only fair value for recognising the intangible asset and grant in accordance with Ind AS 20." 20. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VII)] dated 30-03-2019 w.e.f. 01-04-2019 before it was read as "(c) leases that are within the scope of Ind AS 17, Leases." 21. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VII)] dated 30-03-2019 w.e.f. 01-04-2019 before it was read as "6 In the case of a finance lease, the underlying asset may be either tangible or intangible. After initial recognition, a lessee accounts for an intangible asset held under a finance lease in accordance with this Standard. Rights under licensing agreements for items such as motion picture films, video recordings, plays, manuscripts, patents and copyrights are excluded from the scope of Ind AS 17, and are within the scope of this Standard." 22. Substituted vide NOTIFICATION ....