This report covers the explanation of Australian Accounting Standards Board and the detailed study of intangible assets. Further the report focuses on The Accounting standards used by the companies in Australia to measure the amount of intangible assets.
- What do you mean by Australian Accounting Standards Board?
- Explain AASB 138 Intangible Assets.
- Describe the types of Intangible Assets.
AASB when expanded refers to Australian Accounting Standards Board is an Australian Government Agency that develops and maintains financial reporting standards, which are applicable to the entities in public and private sectors of the Australian Economy. AASB helps in the development of global financial reporting standards and alleviates the participation of the community in standards setting. Accounting standards are set by the AASB which is an independent government agency. AASB was formed in 1991 with jurisdiction of Commonwealth of Australia. The AASB is responsible for making Australian Accounting Standards. The AASB made Accounting standard AASB 138 Intangible Assets under section 334 of the Corporations Act 2001 on 15th July 2004.
An asset is considered as a resource which has an economic value that an organisation, individual or a country owns or controls with a belief that it will give a benefit in the future. There are two kinds of assets:
- Tangible Assets
- Intangible Assets
AASB 138 Intangible Assets:
The primary objective of this accounting standard is to inflict the accounting treatment for intangible assets that are not dealt in another standard. The standard defines how to measure the amount of intangible assets that is to be carried forward and requires specified disclosures about intangible assets. AASB 138 Intangible Assets as amended incorporates IAS 38 Intangible Assets as issued and revised by the International Accounting Standards Boards (IASB). Intangible Assets are the assets that have no physical appearance and structure. For example, Goodwill, brand, patents, trademarks and copyrights. Businesses can create or acquire intangible assets. An intangible asset can either be definite or indefinite, for example brand name. Intangible assets created doesn't appear on the company's final balance sheet. Companies spend on resources or incur liabilities while acquiring, developing, maintaining or enhancing the intangible resources such as scientific or technical knowledge, design and implementation of new processes or systems, licenses, intellectual property, market knowledge and trademarks(including brand names and publishing titles). An intangible asset acquired in a combination may be separable, but only together with a certain tangible or intangible asset.
Types of Intangible Assets:
Some types of Intangible Assets are:
Goodwill: Goodwill is a kind of intangible asset which is related with the purchase of one organisation by another. There are two types of goodwill:
- Purchased Goodwill: Purchased goodwill comes when the goodwill is purchased by a company. The purchase consideration paid is more than the fair value of the separable net assets acquired.
- Self Generated Goodwill: Self Generated goodwill is the value of business which is more than the fair value of the separable net assets. It is often called Inherent Goodwill.
There are some factors that might affect the goodwill of the company like quality of products, locational factors, duration of the business, nature of business, Relations with the customers and suppliers, etc.
- Copyrights: Copyright can be defined as the legal right of the owner on the property or his/her brand or maybe on the asset. Copyright law gives the original makers the exclusive right to further duplicate or use that particular material for a certain time. This means that the original producers of products and anyone who gets the permission to use that idea or maybe that product.
- Patents: Patent is like an intellectual property which gives the owner the right to uniqueness. It is an exclusive right given for an invention/Discovery which can be a product or maybe a process that provides an innovative way of working or maybe a solution to a problem.
- Brand: Brand is an intangible asset which is basically a name, unique quality, logo, etc. which gives a unique identity to the company. Brand equity is a sort of intangible asset which is derived from consumer mental representation for that company. It is a marketing word that describes value of the brand. It is type of premium which is paid as goodwill by one company to another during the process of acquisition.
- Licensing and Rights: Licensing and Rights are the agreement between the owner of intellectual property and the ones who are allowed or authorised to use those intellectual properties for an exchange of some payment.
- Research and Development: Results of R&D department if patented or not patented will fall under the category of Intangible assets. R&D is a method of gaining technical knowledge about any product and use that knowledge to improve existing products or maybe to produce new products.
- Customer Lists: List of customers can also be considered as an intangible asset. It takes a long time to prepare a customers list and is considered to be valuable for a business.
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AASB is Australian Accounting standards Board who has a duty to maintain and develop accounting standards which will be followed by the companies of Australia while doing the accounting. AASB 138 is an accounting standard made and developed by accounting standards board of Australia which is applicable on the intangible assets of the company which specifies the method of measuring the sum total of the net intangible assets of the company. These intangible assets are not to be shown in the company's balance sheet.