Recognition of Intangible Assets and Differences with Goodwill

Goodwill

Advise Canto On Whether The Above Items Should Be Accounted For As Intangible Assets Under Ifrs For Smes And Discuss The Key Differences Between Accounting For The Recognition Of Intangible Assets Other Than Goodwill Under Ifrs For Smes?

Yes the mentioned items in the case should be considered as “intangible assets” under IFRS for SMEs because the domain names owned by Bento can be used by the purchaser for a period of five years. According to IAS 38 of IFRS the criteria of recognizing and determining the intangible assets and it requires disclosures of it. As per IFRS, intangible assets are an recognizable non-monetary assets which are not physically exist. Such kind of assets is identifiable when it is distinguishable or when it is upsurges from prescribed or other leagal documents. It can be sold, licensed and transferred. So in this case a domain name has been used for generation of money and it is also a period of five years. This is a kind of contract that the purchaser can use. Concluding the above factor the this domain can be considered as an intangible assets and it will be posted in the assets side of the balance sheet.

Now the popular questions always arise in mind why there is a difference between goodwill and other intangible assets even though both have no physical existence. According to the IFRS and SME’s there is a key difference between an intangible assets and goodwill. Now going to the brief discussion on that it is required to understand what is good will and the concept of intangible assets.

According to “International Financial Reporting Standard” and “Small and Medium Enterprise the goodwill is a intangible assets as misclleneous category. Which is hard to determind directly. Customer loyalty, reputation of brand and other no quantifiable assets are also considered as goodwill. As per IFRS goodwill can not present independently nor can be purchased or conferred for that goodwill has useful life like other intangible assets. Goodwill has been posted in the balance sheet while two or more companies are come into merger situation. As per the IFRS and SME’s any amount pays above and beyond the net calculated value of the targeted assets it is become goodwill for that particular firm (Johansson,  Hjelström and Hellman 2016).

This is the kind of assets which has non-physical existence but it is identifiable. Copy rights, patents, licience, agreements and domain of the website is an example of other intangible assets. The valuation of it can be estimated and it also can be sold or bought for the business (Martínez‐Torres 2014).

In the accounting recognisation of the goodwill and inytangible assets there is slight difference between them. Goodwill is the payment of premium over the actual price of targeted assets at the time of acquiring a company, hence it can not be disposed off. Whereas intangible assets could be transferred or interchange independently in the business. Intangible assts has define useful life but in case of goodwill, it has such indefi8nite life (Carvalho, Rodrigues and Ferreira 2016).

Reference

Johansson, S.E., Hjelström, T. and Hellman, N., 2016. Accounting for goodwill under IFRS: A critical analysis. Journal of international accounting, auditing and taxation, 27, pp.13-25.

Martínez‐Torres, M.D.R., 2014. Identification of intangible assets in knowledge‐based organizations using concept mapping techniques. R&D Management, 44(1), pp.42-52.

Carvalho, C., Rodrigues, A.M. and Ferreira, C., 2016. The recognition of goodwill and other intangible assets in business combinations–the Portuguese case. Australian Accounting Review, 26(1), pp.4-20.