ACCA Applied Skills · Financial Reporting · Intangible assets
Which of the following is a necessary condition for an item to meet the definition of an intangible asset under IAS 38?
An intangible asset must be identifiable, controlled by the entity and have no physical substance, with expected future economic benefits. It does not need to be bought for cash or held for five years, because internally generated assets and shorter-lived assets can qualify if they meet the criteria.
- AIt is identifiable, controlled by the entity and has no physical substanceCorrect
- BIt has been purchased from an external party for cash
- CIt is expected to be held for longer than five years
- DIt is separately disclosed on the face of the statement of financial position
Explanation
IAS 38 defines an intangible asset as an identifiable non-monetary asset without physical substance. The entity must control it and expect future economic benefits. Purchase for cash is not required, since assets can be internally generated, and there is no minimum five-year holding period.
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