Question

Discuss if the current accounting standard (IAS 38/AASB 138) provide a better representation of the financial performance and financial position of the entity.

Answer 1

IAS38 is about intangible asset

Intangible asset: an identifiable non-monetary asset without physical substance. An asset is a resource that is controlled by the entity as a result of past events (for example, purchase or self-creation) and from which future economic benefits (inflows of cash or other assets) are expected

Identifiability: an intangible asset is identifiable when it: is separable (capable of being separated and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract)

arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

IAS 38 Intangible Assets outlines the accounting requirements for intangible assets, which are non-monetary assets which are without physical substance and identifiable (either being separable or arising from contractual or other legal rights). Intangible assets meeting the relevant recognition criteria are initially measured at cost, subsequently measured at cost or using the revaluation model, and amortised on a systematic basis over their useful lives (unless the asset has an indefinite useful life, in which case it is not amortised).

                             The objective of IAS 38 is to prescribe the accounting treatment for intangible assets that are not dealt with specifically in another IFRS. The Standard requires an entity to recognise an intangible asset if, and only if, certain criteria are met. The Standard also specifies how to measure the carrying amount of intangible assets and requires certain disclosures regarding intangible assets

AASB138 AND IAS38 COMPARISON:

AASB 138 and IAS 38 AASB 138 Intangible Assets as amended incorporates IAS 38 Intangible Assets as issued and amended by the International Accounting Standards Board (IASB). Paragraphs that have been added to this Standard (and do not appear in the text of IAS 38) are identified with the prefix “Aus” or “RDR”, followed by the number of the preceding IASB paragraph and decimal numbering. Paragraphs that apply only to not-for-profit entities begin by identifying their limited applicability. Compliance with IAS 38 For-profit entities that comply with AASB 138 as amended will simultaneously be in compliance with IAS 38 as amended. Not-for-profit entities using the added “Aus” paragraphs in the Standard that specifically apply to not-for-profit entities may not be simultaneously complying with IAS 38. Whether a not-for-profit entity will be in compliance with IAS 38 will depend on whether the “Aus” paragraphs provide additional guidance for not-for-profit entities or contain requirements that are inconsistent with the corresponding IASB Standard and will be applied by the not-for-profit entity. Entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements will not be in compliance with IAS 38.

ACCOUNTING STANDARD AASB 138

The Australian Accounting Standards Board made Accounting Standard AASB 138 Intangible Assets under section 334 of the Corporations Act 2001 on 15 July 2004. This compiled version of AASB 138 applies to annual reporting periods beginning on or after 1 July 2014 but before 1 January 2016. It incorporates relevant amendments contained in other AASB Standards made by the AASB up to and including 4 June 2014.

Objective

The objective of this Standard is to prescribe the accounting treatment for intangible assets that are not dealt with specifically in another Standard. This Standard requires an entity to recognise an intangible asset if, and only if, specified criteria are met. The Standard also specifies how to measure the carrying amount of intangible assets and requires specified disclosures about intangible assets.