Ias 38 Essay

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Introduction Purpose The purpose of the report is to analyze International Accounting Standards 38 (IAS 38). Issues with the standard will be identified. Conclusions will then be made based on our analysis. Background Intangible assets are those that don’t have any physical form. They must be identifiable and separable from the entity, and they can’t be monetary assets, like cash. IAS 38 states that the objective is to prescribe the accounting treatment for intangible assets that are not dealt with specifically in another IFRS. The Standard requires an entity to recognize an intangible asset if, and only if, certain criteria are met. The Standard also specifies how to measure the carrying amount of intangible assets and requires certain disclosures regarding intangible assets (Friedrich & Friedrich, 2009). Main Section Conceptual Analysis Intangible assets may be amortized over many years, and as costs are incurred, it may not be known whether they will ever produce future net benefits (Scott, 2012, p. 264 ). Although the probability of expected future economic benefits is assessed using reasonable and supportable assumptions and represent management’s best estimates of the economic conditions that will exist over the asset’s useful life, users often view them as having low reliability. This is because they are based on uncertain future events. Complete relevance and reliability of the recognized intangible asset will only exist once the net benefits that are attributable to the asset are realized or fail to be realized by the entity receiving the benefit events (Friedrich & Friedrich, 2009, p. 3) The accounting profession recognizes the disclosure of intangible assets to be an adequate trade-off between relevance and reliability. However, the conservatism principle limits the relevance of the disclosure required. This can be seen by the standard’s

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