University Finance Case Study: Intangible Assets under IFRS for SMEs

This case study analyzes the accounting treatment of intangible assets, specifically focusing on a scenario where a UK company, Bento, is acquired by Canto. Bento owns a social media site and trades in domain names. The assignment requires advising Canto on whether these items should be accounted for as intangible assets under IFRS for SMEs. The solution argues that the domain names owned by Bento meet the criteria for recognition as intangible assets, as they can be used for a specific period and generate revenue. The document also distinguishes between goodwill and other intangible assets, highlighting their differences in terms of identifiability, useful life, and transferability, referencing relevant IFRS standards and SME guidelines. The analysis includes key differences in accounting recognition, emphasizing that goodwill arises from the premium paid during acquisition, while other intangible assets can be transferred independently and have a defined useful life.

Running head: ACCOUNTING AND FINNACIAL REPORTING
Accounting and financial reporting
Name of the Student:
Name of the University:
Author note:

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ACCOUNTING AND FINANCIAL REPORTING
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.
Goodwill
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

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ACCOUNTING AND FINANCIAL REPORTING
value of the targeted assets it is become goodwill for that particular firm (Johansson,
Hjelström and Hellman 2016).
Intangible assets
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).
Distinguish between goodwill and other intangible assets
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).

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ACCOUNTING AND FINANCIAL REPORTING
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.