Intangible Asset Accounting Principles

This assignment delves into the accounting principles governing intangible assets, emphasizing the role of standards like AASB 138 and its amendments proposed by the IASB in IAS 38. It highlights how these concepts guide companies in recognizing and reporting intangible assets held during an accounting year. The text emphasizes that failure to meet these requirements prevents companies from recording these assets.

Research Individual
Project

Table of Contents
EXECUTIVE SUMMARY ............................................................................................................3
INTRODUCTION...........................................................................................................................1
TASK 1 .........................................................................................................................................1
How should the project be accounted for in the financial statements for the year ended. ..........1
TASK 2 ..........................................................................................................................................3
The rules or restrictions in AASB 138/IAS 38 ...........................................................................3
TASK 3............................................................................................................................................4
Response to Chief Executive officer & recommendation ...........................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

EXECUTIVE SUMMARY
This report summarises about the research project and Technology Enterprise Ltd is a
company that is planing to modify its design of charging batteries. AASB 138/ IAS 38 is mainly
associated to treatment of intangible assets in context to evaluate nature of design. For an
organisation it is necessary to accomplish the requirement of AASB in order to record new
design in context to intangible assets. The recommendations about how the corporation can fulfil
the expectation of investor's interpretation of information related to financial reports.

INTRODUCTION
To make research project is required for the organisation so that its business can expand.
The assets which does not physically exist and can not be touched are known as intangible
assets. Australia Accounting Standard Board form a law in context to the intangible assets and
the amended regulations of IAS 38 are imposed by International Accounting Standard Board are
also considered under this implication. To better understand this concept Technology Enterprise
Ltd has been chosen which engaged in the business of recharging batteries. There are various
topics are covered in this report such as: how project is accounted in financial statements for the
year ended, rules, regulations and restrictions related to AASM 138/IAS 38 to reduce the
comparability of financial statements. Apart from this it also discuss about recommendation as
how an organisation can mitigate its concerns about investors interpretation of information
reported in financial statements.
TASK 1
How should the project be accounted for in the financial statements for the year ended.
In month of July 2017 the respective Technology Enterprise LTD have conducted
research project that support in modifying the old methods used for recharging the battery. It is
observed that every task of following project must be completed in the month of June so that
company can applied for further design. As from this project respective company is planning to
expand business and attain the economic support in approaching 10 year by altering each goods
in its consumer range (vom Brocke and Lippe, 2015). Management accountant of company are
not convinced with the methods by which project are accounted therefore they apply new
development accounts in order to distribute salaries to engineers. They are not sure with the
mode by which it should be accounted in financial reports of corporation in context to AASB
138/ IAS 38. Accounting of it is describes as below:
Income statement for the year ended 30 June, 2018
Particulars Amount ($)
Revenues X
Less: Cost of goods sold X
Gross profit X
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Less: Indirect expenses
Cost of time spent searching for & evaluating
materials
100000
Cost of time in designing model and testing
prototypes
700000
Cost of time spent on training maintenance workers
for new design
200000
Add: Indirect incomes X
Net profit 1000000+X
Balance sheet for the year ended 30 June, 2018
Liabilities Amount Assets Amount
Share capital X Fixed assets X
Retained earning X Current Assets X
Net profit 100000+
X
Intangible assets (New
Design)
300000
Current liabilities X
Long term liabilities X
Total X Total X
As per AASB 138, the cost which incurred in design or alternatives can be treated as
indirect expenditures for the corporation and it will reduce from gross profit. There are distinct
types of cost involve such as: cost of time spent searching for & evaluating alternative materials,
cost of time designing models, constructing & testing prototypes and cost of time spent on
training maintenance workers for the new design. From the gross profit training cost is reduced
and this is not a direct expenditure. The estimated amount in context to present value method is
$400000, $300000 is the estimated fair value which includes in position statement and as per
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AASB fair value of an intangible asset will be recorded in financial statements of organisation
(Snoeren and Abma, 2012).
There are various issues are arises in front of corporations while making financial report
and policies and rules which are associated with it can be meliorate by legal bodies as per their
suitability. International Accounting Standard Board has issued AASB which provide help the
organisations to record financial data in financial statement and all Australian companies have to
follow this. AASB is associated with the treatment of intangible assets which are recorded in
financial statement. There are various requirements which are need to be analysed in context to
intangible assets and these are as mention below:
 If intangible assets are evaluated in monetary terms than it does not treated as intangible
reason being corporations does not but purchase if from other place.
 These types of assets does have any physical existence so that it can not be touched.
 In case if assets are sold than economic benefits will received by organisation which meet
the requirements of Australian Accounting Standards Board (Sierpiński and Celiński,
2014).
Justification: As Technology Enterprise Ltd is planning to new design of charging
batteries and it fulfil all requirements which are related to the treatment of intangible assets. As
economic benefit received by the corporation is $100000 because present value of design is
$400000 & fair value is $ 300000. As the company has effectively manage the assets which will
sell out and it can change the design as per the necessity. This is the reason which shows that
new design will not consider as tangible assets.
TASK 2
The rules or restrictions in AASB 138/IAS 38
In the year 2004, Australian Accounting Standards Board is being incorporated with the
aim of accounting treatment associated to intangible assets which are not considered in any other
accounting standards. With the help of this companies can make accounting treatment of
intangible assets in their books of account. It help the corporations to understand how to identify
the amount of specific assets & how to disclose it. That law covered the amendments made by
International Accounting Standard Board in context to IAS 38. According to law, intangible
assets are required to identifiable, non monetary etc. There are various intangible assets such as:
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copyright, licence, patent and software. In the situation when assets does not considered than
same have to be expensed and it can influence the business and profits also (Mir and Pinnington,
2014).
For an organisation, it is important to categories the assets as per its nature so that
appropriate treatment can be done as per the requirement. In this context, company can take help
of legal bodies which help to classified tangible & intangible assets. Similarly the items that are
not comes under in two categories will put as goodwill as a result it does not require to consider
in context to financial statement. Therefore, it is analyse that Australian Accounting Standards
Board has cover all aspects which are require to be follow by the organisations in order to meet
compliances which followed by specific standards as per companies law. If any company does
not follow the rules and regulations which are associated with it than business can oppressed so it
is important for the corporations to fulfil the requirement and compliances which are beneficial
in context to financial reporting obligations. The standards which are not used in context to
financial statements are mention as below:
 That standard will not applied in context to deferred tax assets as per Australian
Accounting Standards Board 112 Income Tax (Marouf and Khalil, 2015).
 Leases that involves as scope of Australian Accounting Standards Board 117 leases.
 The assets which are applied for staff benefit as considered in Australian Accounting
Standards Board 119 employees benefit.
 Goodwill purchased by organisations as per AASB 3 business combinations.
 In Australian Accounting Standards Board 132, financial assets are disclose.
For the corporations it is important to use Australian Accounting Standards Board 138
standard while annual reporting period that start before 01/01/2009 & after 01/01/ 2005. For non
profit organisations it is apply from the time period that starts from 01/01 2014. It has been
analysed that appropriate amendments are considered in other standards of Australian
Accounting Standards Board which made after 18/12/2012. Apart from this, for non profit
making entities which are using & amending with AASB 138, are also fall under the regulations
which are associated with International Accounting Standard 38 will amended (Jackson, 2014).
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TASK 3
Response to Chief Executive officer & recommendation
As the Chief Executive officer of company can record the assets at $400000 in balance
sheet & add $300000 to the profits. According to Australian Accounting Standards Board 138
fair value of an intangible assets can show in book of accounts reason being with the help of it
economic benefit that is gained by corporation can be analysed. For a company it is necessary to
classified the assets as per its nature which mention under AASB 138/IAS 38. According to
International Accounting Standard Board, it is necessary for the organisations to provide all
information about each type of assets and in case it is not possible than it is treated as expensed
for the company. As a result profits can be influenced through it. So it is recommended to Chief
Executive Officer to record the value of $ 300000 under the head of intangible assets in
statement of financial position. It is required for Technology Enterprise Ltd to categories the
assets as per its nature otherwise the business of organisation can negatively influence (Griva and
Chostelidou, 2012).
Efficient market hypothesis: As investment theory is helpful to describe information in
context to share price of corporation. Therefore, investors can get higher returns from the amount
which they invest in the organisation. It has been analysed that investor can not get higher
returns as the average of market.
With the help of this theory investors can determine the position in which maximum
returns can be generated on continual basis. If the investors of Technology Enterprise Ltd finds
that they will not earn returns than they will not invest their funds (Wen and Graham, 2013).
Recommendations: As the Chief Executive Officer of Technology Enterprise Ltd is
concern about how company can palliate concerns about investors interpretation of information
reported in financial reports of organisation. As there are various recommendations are helpful to
Chief Executive Officer in order to minimize this:
For the organisation it is important to follow all requirement which are related to
Australian Accounting Standards Board so that legal issues can be avoided.
Technology Enterprises Ltd can use efficient market hypothesis which is helpful to give relevant
information about price of share so that investors can take better decisions and get higher returns.
For a company it is important to provide detailed information to the investors so that they can
take better decisions in the terms of investment (Akkerman and Simons, 2012).
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CONCLUSION
In conclusion, it is stated that several kind of principle and standard are being
implemented by government that are needed to be implemented by companies while conducting
business in that specific region. There are various important rules such as AASB138 that
includes amendments proposed by IASB in IAS 38. This concepts mainly focus with dealing in
intangible assets and also support in fulfilling the requirements to count these intangible assets
that are held by company during an accounting year. In case if company do not able to meet the
these requirement than they are not allowed to record these assets.
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REFERENCES
Books and Journals:
Akkerman, S., Admiraal, W. and Simons, R.J., 2012. Unity and diversity in a collaborative
research project. Culture & Psychology.18(2). pp.227-252.
Griva, E., Panitsidou, E. and Chostelidou, D., 2012. Identifying factors of job motivation and
satisfaction of foreign language teachers: research project design. Procedia-Social and
Behavioral Sciences.46.pp.543-547.
Jackson, R., 2014. The interpretive approach as a research tool: inside the REDCo project. In
Religion, Education, Dialogue and Conflict (pp. 96-114). Routledge.
Marouf, L.N. and Khalil, O.E., 2015. The influence of individual characteristics on knowledge
sharing practices, enablers, and barriers in a project management context. International
Journal of Knowledge Management (IJKM).11(1). pp.1-27.
Mir, F. A. and Pinnington, A. H., 2014. Exploring the value of project management: linking
project management performance and project success. International journal of project
management.32(2). pp.202-217.
Sierpiński, G., Staniek, M. and Celiński, I., 2014, November. Research and shaping transport
systems with multimodal travels–methodological remarks under the green travelling
project. In 7th International Conference of Education, Research and Innovation ICERI
Proceedings (pp. 3101-3107).
Snoeren, M. M., Niessen, T. J. and Abma, T. A., 2012. Engagement enacted: Essentials of
initiating an action research project. Action Research.10(2). pp.189-204.
vom Brocke, J. and Lippe, S., 2015. Managing collaborative research projects: A synthesis of
project management literature and directives for future research. International Journal
of Project Management.33(5). pp.1022-1039.
Wen, W., Forman, C. and Graham, S.J., 2013. Research note—The impact of intellectual
property rights enforcement on open source software project success. Information
Systems Research.24(4). pp.1131-1146.
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