Page 14 - Ebook Financial Accounting 3

1.4 The Initial Measurement of Intangible Assets

1.4.1 Initial Cost of Intangible Assets

An intangible asset is measured initially at cost. The costs comprise of:

✔ Purchase price including incidental costs such as taxes less trade discounts and
rebates, and

✔ Any directly attributable cost of preparing the asset for intended use. Such as

acquisition from business combination and from government grant.

a. Acquisition as Part of A Business Combination
In a business combination, the acquirer is to recognise at the date of acquisition

all identifiable intangibles of the acquiree, separately from goodwill. These identifiable
intangibles could be those that were recognised and those that have not been recognised

by the acquiree. The acquirer should recognise in-process research and development

project of the acquiree if it meets the definition of intangible and its fair value can be
measured reliably. These intangible assets will be measured at fair value which is the

quoted market prices in an active market.

b. Acquisition by Way of a Government Grant

Intangible assets acquired free of charge, or for a nominal consideration, by way
of a government grant, are measured initially at fair value or at cost. The cost of the

intangible acquired is measured at fair value. If the exchange transaction lacks
commercial substance or the fair value of neither the asset neither received nor given

up can be measured reliably, the acquired asset will be measured at the carrying amount
of the asset given up.

8