Open Safari Case

1903 Words8 Pages
Is the website an asset of Open Safari? Open Safari should identify the website as their intangible asset. Under IAS 38, intangible asset is defined as an identifiable non-monetary asset without physical substance. It should be controlled by the entity with expected future economic benefits. IAS 38 requires that an intangible asset will be recognized by an entity when it satisfies both of the following criteria: 1. It is probable that any future economic benefit associated with the item will flow to the entity. 2. The item has a cost or value that can be measured with reliability. Also, according to IAS 38.51-57 the Internally Generated intangible Assets, if an entity can distinguish the research phase from the development phase of an internal project to create an intangible asset, the intangible asset should be recognized only in the development phase. In the development phase, the technical and commercial feasibility of the asset for sale or use have been established, which demonstrates an ability of creating future economic benefits. The website, officially going online on 31, January 20X3, is a valuable resource that belongs to Open Safari’s business. It generates the future economic benefits for Open Safari’s by providing a wealth of information about the lodge and Open Safari’s ecotourism activities and a channel of ordering safaris directly. Also, the website has a development cost of £100,000. Therefore, based on the recognition criteria above, the website should be classified as an intangible asset, and the £100,000 development costs are capitalized. Do the expenditures on advertising and promotion activates generate an asset defined for Open Safari? Open Safari carried out an extensive advertising campaign and promotional activities in a wide range of regions. However, the expenditure on advertising and promotion activities did not generate an asset
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