Definition And Nature Of Intangible Assets Accounting Essay.
Once these intangible assets are brought in state of strategic readiness, they start contributing in generating cash for the business. For example, if McDonalds sets a service response time of 30 seconds and trains its human capital to achieve this target, the customer turnover at the counter will increase and lead to higher revenues.
An intangible asset is any asset that lacks physical substance that is difficult to value. As economies modernize, intangible assets become an increasingly important asset class. In many cases, the value of a firm's intangible assets far outweigh its physical assets.
An intangible asset is amortized if the asset has an identifiable useful life. The annual expense recognized as a result of straight line amortization is simply the cost of the intangible asset divided by the number of years in it’s estimated useful life. The amortization expense recognized each year will be the same, and the value of the intangible asset will be 0 at the end of its useful life.
Goodwill is an intangible asset and represents the difference between the cost of an acquisition and the fair value of its identifiable assets, liabilities and contingent liabilities. A recent analysis by PricewaterhouseCoopers (PWC) estimates that intangible assets accounted for approximately 75 % of the purchased price of acquired companies in recent years. The histories of accounting.
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. (IAS 38.8) Thus, the three critical attributes of an intangible asset are.
Intangible assets are not physical assets that can be easily recognized. In some cases, perceptions may clash and what may seem like an intangible asset to one party may appear to be a liability to another. Also, the rate and complexity of newly emerging technologies can present a challenge for maintaining awareness of intangible asset holdings.
Intangible assets as per IAS 38 a) Reasons for development of IAS 38 in current form For analyzing the reasons for the development of IAS 38 in itspresent form, it is important to understand its treatment to intangible assets, both internally and externally generated.IAS 38 treats an intangible asset as an identifiable non-monetary asset without physical substance held for use.