Chapter 3 - Asset valuation: Intangible assets

Abstract

This chapter focuses on the treatment of intangible assets for their valuation. The objective of IAS 38 is to prescribe the accounting treatment for intangible assets and how to recognize an intangible asset. This standard applies to advertising, training, start-up, research and development, licensing agreements, patents, and copyrights. Quoted market prices are the most reliable estimates of fair values of intangible assets, which when not available, the price of the most recent similar transaction provided no significant change in the economic circumstances occurred between the transaction date and the date of fair value. Certain entities that are regularly involved in the purchase and sale of unique intangible assets have developed techniques for estimating their fair values indirectly. These techniques may be used to calculate the initial measurement of an intangible asset if their objective is to estimate fair value for that purpose. The objective of IAS 17 is to prescribe, for lessees and lessors, the appropriate accounting policies and disclosures to apply to both operating and finance leases. This standard applies to all leases other than leases to explore for minerals, oil, and natural gas, licensing agreements for motion pictures, videos, plays, manuscripts, patents, and copyrights. There is also an exemption to the measurement of investment properties held by lessees under finance leases and vice versa to investment properties let out as operating leases by lessors as well as those relating to biological assets governed by IAS 41. Classification of leases is based on the extent to which risks and rewards incident to ownership lie with the lessee or lessor. Risks include idle capacity losses, obsolescence, variations in returns, etc., and rewards include expectation of future profits and appreciation in the value of the residual value.