Compliance of AASB 138 for Recording of Intangible Assets

AASB-138
Module Number-
[DATE]
Hewlett-Packard
[Company address]

Table of Contents
Introduction...........................................................................................................................................1
Answer to question no- 1.......................................................................................................................1
Answer to question no-2........................................................................................................................5
Answer to question no- 3.......................................................................................................................6
Response to CEO in relation to market hypothesis set by AASB 138...............................................6
Recommendations to meet the concerns about investor interpretation..............................................8
Conclusion.............................................................................................................................................8
References...........................................................................................................................................10

Introduction
This report reveal the compliance of the AASB 138 for recording of the intangible
assets in the books of account. To establish an alignment between the domestic reporting
frameworks and the international reporting frameworks in the rapidly changing economic
environment, it is necessary for every organisation to comply with the required laws and
accounting standards. In this report we will discuss the provisions of AASB 138 and their
role in depicting the true and fair value of recorded assets and liabilities in the books of
accounts and in showing the ability of company. For making the key understanding regarding
the subject a case study of Technology Enterprises Ltd has been considered. The case consist
the queries regarding the internally generated intangible assets and its cost. The report
demonstrates the significant features of AASB 138 and the legal obligations in the company’s
accounting and recording framework.
Answer to question no- 1
RECOGNITION AS INTANGIBLE ASSET OR NOT
 For proper treatment of accounts of Technology Enterprises Ltd. For intangible assets it is
required to ascertain the fact that whether the generated assets of the company falls into the
category of intangible assets or not. The provisions of AASB 138 (equivalent to the
requirements of IAS 38) are needed to be examine and check out, which are given below:
Relevant
paragraph of
AASB 138
Requirement set by the paragraph
Paragraph 9 The intangible asset is defined by this paragraph. According to the
definition an intangible asset involves the maintenance, acquisition,
enhancement or development of scientific or technological
knowledge in the category of items specifically considered as
intangible asset (Denicolai, Cotta Ramusino, & Sotti, 2015).

Paragraph 18 In the paragraph the requirements to fulfil the recognition criteria
for the asset in financial statements to be approved by the definition
of intangible assets
Paragraph 21 An asset is to be met with the following conditions of recognition
criteria:
The intangible asset has the cost which can be measured by the
organisation with the reliability and
Entity has certain profitability of “expected future economic
benefits” due to the intangible asset.
Paragraph 22 The management uses the reasonable and supportable judgements
to determine the profitability of “expected future economic
benefits”. It is taken by the best estimation of upcoming economic
conditions.
Paragraph 23 The management judgements are used to ascertain the above
discussed profitability by giving favourable weight to external
evidence.
 In the case of Technology Enterprises Ltd, in June, 2018 they have a new project which is
related to method of recharging batteries. The expectations of company are for next 10 years
regarding the economic benefits from such technology. The incurred cost in the establishment
of technology has also been disclosed by the company. With the help of best judgement of
management the profitability of “expected future economic benefits” can be determined.
 The project established under the organisation based on the technological and scientific
knowledge which makes it eligible to be an intangible asset as per the definition defined
under paragraph 9. Also the asset can be identified as an intangible asset because as per the
conditions of recognition criteria mentioned under paragraph 18 and 21, this is an Internally
Generated Intangible Asset.