A6.

IAS 38 Intangible Assets is amended as described below: Introduction Paragraph 7 is deleted. Standard In paragraph 7 the following definition is added: Entity-specific value is the present value of the cash flows an entity expects to arise from the continuing use of an asset and from its disposal at the end of its useful life or expects to incur when settling a liability. In paragraph 7 the following definitions are amended: Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Cost is the amount of cash or cash equivalents paid and the fair value of the other consideration given to acquire an asset at the time of its acquisition or production. The residual value of an intangible asset is the estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. Useful life is: (a) the period over which an asset is expected to be available for use by an entity; or (b) the number of production or similar units expected to be obtained from the asset by an entity. Paragraph 18 and the immediately preceding heading are amended to read as follows: Recognition and Measurement 18. The recognition of an item as an intangible asset requires an entity to demonstrate that the item meets: (a) the definition of an intangible asset (see paragraphs 7-17); and (b) the recognition criteria set out in this Standard (see paragraphs 19-55). This is the case for costs incurred initially to acquire or internally generate an intangible asset and those incurred subsequently to add to, replace part of, or service it. Paragraph 18A is added: 18A. The nature of intangible assets is such that, in many cases, there are no additions to an asset or replacements of part of an asset. Accordingly, most subsequent expenditures are likely to maintain the future economic benefits embodied in an existing intangible asset rather than meet the definition of an intangible asset and the recognition criteria set out in this Standard. In addition, it is often difficult to attribute subsequent expenditure directly to a particular intangible asset rather than to the business as a whole. Therefore, only rarely will subsequent expenditure — expenditure incurred after the initial recognition of a purchased intangible asset or after completion of an internally generated intangible asset — be recognised in the carrying amount of an asset. Consistently with paragraph 51, subsequent expenditure on brands, mastheads, publishing titles, customer lists and items similar in substance (whether externally purchased or internally generated) is always recognised in profit or loss as incurred to avoid the recognition of internally generated goodwill. Paragraph 24 is amended to read as follows: 24. The cost of an intangible asset comprises: (a) its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates; and (b) any directly attributable cost of preparing the asset for its intended use. Paragraphs 24A-24D are added: 24A. Examples of directly attributable costs are: (a) costs of employee benefits (as defined in IAS 19 Employee Benefits) arising directly from bringing the asset to its working condition; and (b) professional fees. 24B. Examples of costs that are not a cost of an intangible asset are: (a) costs of introducing a new product or service (including costs of advertising and promotional activities); (b) costs of conducting business in a new location or with a new class of customer (including costs of staff training); and (c) administration and other general overhead costs. 24C. Recognition of costs in the carrying amount of an intangible asset ceases when it is in the condition necessary for it to be capable of operating in the manner intended by management. Therefore, costs incurred in using or redeploying an intangible asset are not included in the carrying amount of that asset. For example, the following costs are not included in the carrying amount of an intangible asset: (a) costs incurred while an asset capable of operating in the manner intended by management has yet to be brought into use; and (b) initial operating losses, such as those incurred while demand for the asset’s output builds up. 24D. 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 in profit or loss and included in their respective classifications of income and expense. Paragraph 34 is amended to read as follows: 34. One or more intangible assets may be acquired in exchange for a non-monetary asset or assets, or a combination of monetary and non-monetary assets. The following discussion refers simply to an exchange of one non-monetary asset for another, but it also applies to all exchanges described in the preceding sentence. The cost of such an intangible asset is measured at fair value unless (a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given up is reliably measurable. The acquired asset is measured in this way even if an entity cannot immediately derecognise the asset given up. If the acquired asset is not measured at fair value, its cost is measured at the carrying amount of the asset given up. Paragraphs 34A and 34B are added: 34A. An entity determines whether an exchange transaction has commercial substance by considering the extent to which its future cash flows are expected to change as a result of the transaction. An exchange transaction has commercial substance if: (a) the configuration (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. 34B. Paragraph 19(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 for which comparable market transactions do not exist is reliably measurable if (a) the variability in the range of reasonable fair value estimates is not significant for that asset or (b) the probabilities of the various estimates within the range can be reasonably assessed and used in estimating fair value. If an entity is able to determine reliably the fair value of either the asset received or the asset given up, then the fair value of the asset given up is used to measure cost unless the fair value of the asset received is more clearly evident. Paragraph 35 is deleted. Paragraph 54 is amended to read as follows: 54. The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management. Examples of directly attributable costs are: (a) costs of materials and services used or consumed in generating the intangible asset; (b) costs of employee benefits (as defined in IAS 19 Employee Benefits) arising from the generation of the intangible asset; (c) fees to register a legal right; and (d) amortisation of patents and licences that are used to generate the intangible asset. IAS 23 Borrowing Costs specifies criteria for the recognition of interest as an element of the cost of an internally generated intangible asset. The heading preceding paragraphs 60-62 is deleted. Paragraphs 60 and 61 are deleted. Paragraph 62 is deleted, its content having been moved to paragraph 18A. The heading preceding paragraph 63 is amended to read as follows: Measurement After Recognition Paragraphs 76 and 77 are amended to read as follows: 76. If an intangible asset’s carrying amount is increased as a result of a revaluation, the increase shall be credited directly to equity under the heading of revaluation surplus. However, the increase shall be recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. 77. If an intangible asset’s carrying amount is decreased as a result of a revaluation, the decrease shall be recognised in profit or loss. However, the decrease shall be debited directly to equity under the heading of revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that asset. Paragraphs 79 and 80 are amended to read as follows: 79. The depreciable amount of an intangible asset shall be allocated on a systematic basis over its useful life. There is a rebuttable presumption that the useful life of an intangible asset will not exceed twenty years from the date when the asset is available for use. Amortisation shall begin when the asset is available for use. Amortisation shall cease when the asset is derecognised. 80. Amortisation is recognised even if there has been an increase in, for example, the asset’s fair value or recoverable amount. 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 or potential competitors; (f) the level of maintenance expenditure required to obtain the expected future economic benefits from the asset and an entity’s ability and intent to reach such a level; (g) the period of control over the asset and legal or similar limits on the use of the asset, such as the expiry dates of related leases; and (h) whether the useful life of the asset is dependent on the useful life of other assets of the entity. Paragraphs 88-90 are amended to read as follows: 88. The amortisation method used shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. If that pattern cannot be determined reliably, the straight-line method shall be used. The amortisation charge for each period shall be recognised in profit or loss unless another Standard permits or requires it to be included in the carrying amount of another asset. 89. A variety of amortisation methods can be used to allocate the depreciable amount of an asset on a systematic basis over its useful life. These methods include the straight-line method, the diminishing balance method and the units of production method. The method used is selected based on the expected pattern of consumption of the future economic benefits embodied in the asset and is applied consistently from period to period, unless there is a change in the expected pattern of consumption of those future economic benefits. There is rarely, if ever, persuasive evidence to support an amortisation method for intangible assets that results in a lower amount of accumulated amortisation than under the straight-line method. 90. Amortisation is usually recognised in profit or loss. However, sometimes the future economic benefits embodied in an asset are absorbed in producing other assets. In this case, the amortisation charge constitutes part of the cost of the other asset and is included in its carrying amount. For example, the amortisation of intangible assets used in a production process is included in the carrying amount of inventories (see IAS 2 Inventories). Paragraph 93 is amended to read as follows: 93. 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 IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Paragraph 93A is added: 93A. 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. Paragraphs 94 and 95 are amended to read as follows: 94. The amortisation period and the amortisation method shall be reviewed at least at each financial year-end. If the expected useful life of the asset is different from previous estimates, the amortisation period shall be changed accordingly. If there has been a change in the expected pattern of consumption of the future economic benefits embodied in the asset, the amortisation method shall be changed to reflect the changed pattern. Such changes shall be accounted for as changes in accounting estimates in accordance with IAS 8. 95. During the life of an intangible asset, it may become apparent that the estimate of its useful life is inappropriate. For example, the recognition of an impairment loss may indicate that the amortisation period needs to be changed. Paragraphs 103 and 104 are amended to read as follows: 103. An intangible asset shall be derecognised: (a) on disposal; or (b) when no future economic benefits are expected from its use or disposal. 104. 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 included in profit or loss when the asset is derecognised (unless IAS 17 requires otherwise on a sale and leaseback). Gains shall not be classified as revenue. Paragraphs 104A-104C are added: 104A. 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). In determining the date of disposal of such an asset, an entity applies the criteria in IAS 18 Revenue for recognising revenue from the sale of goods. IAS 17 applies to disposal by a sale and leaseback. 104B. If under the recognition principle in paragraph 19 an entity recognises in the carrying amount of an asset the cost of a replacement for part of an intangible asset, then it derecognises the carrying amount of the replaced part. If it is not practicable for an entity to determine the carrying amount of the replaced part, it may use the cost of the replacement as an indication of what the cost of the replaced part was at the time it was acquired or internally generated. 104C. 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 IAS 18 reflecting the effective yield on the receivable. Paragraph 105 is deleted. Paragraph 106 is amended to read as follows: 106. Amortisation does not cease when the intangible asset is no longer used or is held for disposal unless the asset has been fully depreciated. In paragraph 107, the sentence ‘ Comparative information is not required. ’ is deleted. Paragraph 111(e) is amended to read as follows: (e) the amount of contractual commitments for the acquisition of intangible assets. Paragraph 113(a)(iii) is amended to read as follows: (iii) the carrying amount that would have been recognised had the revalued class of intangible assets been carried under the benchmark treatment in paragraph 63; and Paragraph 113(b) is amended to read as follows and paragraph 113(c) is added: (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; and (c) the methods and significant assumptions applied in estimating the assets’ fair values. Paragraph 121A is added: 121A. The requirements of paragraphs 34-34B regarding the initial measurement of an intangible asset acquired in an exchange of assets transaction shall be applied prospectively only to future transactions.