Page 10 - Ebook Financial Accounting 3
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b. Entity control over intangible assets
It is present if the entity has the power to obtain future economic benefits
flowing from the underlying resource and restrict others from having access to those
benefits. Legal rights that are enforceable in courts may indicate control. An entity may
derive economic benefits from skilled workers; market share and customer list but has
no control over them.
Intangible assets must under company’s control due to past. For example,
company may protect their employee’s technical knowledge or expertise through legal
right. That legal right can be in pattern and copyright. In this case, company can have
their control for the knowledge and legal right as future economic benefits with obstruct
others to access that benefit. Therefore, that items can be recognized as pattern and
copyright under intangible assets.
c. Expected the future economic benefits will flow to entity
Future economic benefits may arise from the sale of products or services, cost
saving or renting of the asset. MFRS 138 requires an entity to assess the probability of
future economic benefits using reasonable and supportable assumptions that represent
management’s best estimate of the set of economic conditions that will exist over the
useful life of the asset. In assessing the degree of certainty attached to the flow of future
economic benefits greater weight should be given to external evidence.
For example, future economic benefits will arise when sales of product or services and
it will reduce cost for company.
Entity control
Expected the future
Identifiable
economic benefits
Criteria of
Intangible Asset
Figure 1.3
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