Examiner’s report – FR March/June 2021
11
make sense together. It is important to read each question carefully and to realise
that option B could not be the correct response as IAS 38 does not apply this rule to
all intangible assets and option A already identifies that intangible
assets with an
indefinite useful life should not be amortised.
Question 2
What is the correct answer?
The correct responses are:
C – IAS 38 permits the revaluation of intangible assets only if there is an
active market for such assets
D – IAS 38 requires that the initial recognition of intangibles must be at cost
An entity’s accounting policy for intangible assets is separate
to its accounting policy
for tangible non-current assets. Intangible assets must be measured initially at cost,
but subsequently it is possible to measure certain intangible assets under the
revaluation model where, after initial recognition, intangible assets will be carried at a
revalued amount. However, it is only possible to hold
intangible assets under the
revaluation model where an active market exists for such assets.
In practice, this means that most intangible assets will not be measured under the
revaluation model. IAS 38 states that it is uncommon for an active market to exist for
an
intangible asset, although it may happen (e.g. for freely transferable intangible
assets such as taxi licences, fishing licenses or production quotas). An active market
cannot exist for intangible
assets such as brands, patents or trademarks because
each asset is unique and the price paid for one asset may not provide sufficient
evidence of the fair value of another. Such prices are also often not available to the
public.
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