INTERNALLY GENERATED INTANGIBLE ASSETS

Running head: INTERNALLY GENERATED INTANGIBLE ASSETS
Internally generated intangible assets
Name of the Student
Name of the University
Author Note

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INTERNALLY GENERATED INTANGIBLE ASSETS
Executive summary:
The report is prepared to evaluate the impact of the accounting standard IAS 138/AASB 138
in the treatment of intangible assets of the company. It also involves the discussion on the
identification of the differences between the intangible assets that is generated internally by
the organization and intangible assets that are acquired. The adoption of the standard for the
treatment of intangible assets by the company has been discussed in terms of their willingness
to adopt. The accounting treatment of the intangible assets are supported by the calculation
that demonstrates how such assets is recorded in the books of account.

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INTERNALLY GENERATED INTANGIBLE ASSETS
Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................3
Evaluating the impact of AASB 138/IAS 38 for internally generated intangible assets:..........3
Identification of the difference between accounting for internally generated intangible assets
and acquired intangible assets:...................................................................................................4
Example explaining the computation of internally generated goodwill....................................7
Identifying the reasons behind the reluctance of the companies to press:.................................8
Conclusion:................................................................................................................................9
References list:.........................................................................................................................10

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INTERNALLY GENERATED INTANGIBLE ASSETS
Introduction:
The paper is developed to critically assess the accounting standard AASB 138 and its
impact on the reporting entities. AASB 138 deals with the intangible assets that prescribes
accounting treatment for the same. There are some specified sets of criteria that are required
to be met by reporting entity to recognize intangible assets. Intangible Asset has no physical
existence unlike physical assets like building, land, machinery, equipment, inventory and
much more. It is very challenging to ascertain the value of intangible assets. Both AASB138
and IAS38 provides provision regarding the accounting of the intangible assets.
Intangible assets are of two types- Internally generated and acquired. Intangible
assets that are generated internally refer to the assets that the company generate itself for the
sole purpose of increasing its productivity or giving the firm a competitive edge in the open
market. Intangible assets developed by the firm include brand names, such as goodwill that
are generated which is not openly stated in the financial statement but it is basically the
distinction between the market value of the business and sum total of the total assets (Su et al.
2018). On the other hand, Acquired Intangible Assets are those intangible assets that a
business purchase either to improve the product quality, production process or acquiring
some new updated technologies to gain a competitive edge in the market. Acquired intangible
Assets includes goodwill, patents, copyrights and many more (Cosmulese et al. 2017).
Recognition of intangible assets generated internally should not be done as an asset and
assessing the intangible assets as internally generated classifies the generation of asset into
research and development. Acquired intangible assets represents the amalgamation and
accounts the purchase nature according to the accounting standard. However, in spite of
adding any material value to the company, the intangible assets are invaluable to the
company in the way that it increases its competitive strength in the market. For example, the
brand image and goodwill of different MNC’s like Nike, Adidas increases its competitive