Tangible and Intangible

AssetsKami l le BarrogaCzar ina Cabatay

Dani lo GalangMadonna Ni lo

Carmel Nucum

Investments in land, buildings (or part of a building), and some property interests of a lessee in finance leases held to earn rentals or for capital appreciation or both

The property’s FV can be measured reliably without undue cost or effort on an ongoing basis.

Sec 16: Investment Property

at cost if deferred payments, cost

is the PV of future payments

if held under lease, lower of PV of minimum lease payments and FV of PPE

In case of mixed use, property, PPE and investment property must be separated. If FV of investment property portion can’t be determined, recognize whole as PPE

SMEsInitial

RecognitionFull IFRS SAME

Separation depends on the ability of the portions to be sold/leased out separately

If portions can’t be sold separately, the property is investment property if only an insignificant portion is held for use in the production/ supply/ administrative

Use the Fair Value model

Gains and Losses arising from changes in FV, recognized in Profit &Loss

Property interest held under operating lease, is the item measured at FV (not the underlying property)

SMEs Full IFRS May choose either Fair

Value or Cost model, but only one must apply to all investment properties

SAME (for FV model)

SAME. Add’l: Property interest under operating lease but considered Investment Property triggers FV model policy for all investment property

Subsequent Measurement

NOT COVERED

SMEs Full IFRSDerecognize when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal

Disposal

If FV is no longer available without undue cost or effort, account for item as PPE

If no longer meets Investment Property criteria, transfer to PPE

SMEs Full IFRSTransfer only when there is change in use(doesn’t matter if FV is not measured without undue cost or effort)

SAME

More guidance on transfer between categories

Transfers

Mixed use property SME: based on ability of entity to determine FV of Inv.

Prop FULL: based on ability of entity to sell both parts

separatelySubsequent Measurement

SME: Fair Value Model only FULL: Fair Value Model or Cost Model

Transfers SME: based on availability of FV FULL: based on change in use

Disposal SME: not covered FULL: when withdrawn from use, no future economic

benefit

Key Differences

Tangible assets that are:• Held for use in the production or supply of

goods and services, for rental to others or for administrative purposes.

• Expected to be used during more than one period

Sec 17: Property, Plant and Equipment

Recognize PPE if and only if:

It is probable that future economic benefits associated w/ the item will flow to the entity

The cost can be measured reliably

Spare parts are PPE if they will be used from more than one period, or can only be used with another PPE

Lands and building are separate items

SMEs Full IFRSSAME

SAME

SAME

Initial Recognition

at cost, including costs to get the property ready for its intended use

Elements of cost: its purchase price any costs directly

attributable to bringing the asset its necessary condition

the initial estimate of the costs of dismantling the item

If deferred, PV of payments

SMEs Full IFRSSAME

Initial Recognition

Historical cost less

depreciation less impairment model only The carrying amount,

less estimated residual value, is depreciated over the asset's anticipated useful life.

SMEs Full IFRSBoth Cost and

Revaluation models are allowed

Subsequent Measurement

This applies to Exchanges of Assets

if transaction has commercial substance, at FV

If it has no commercial substance and FV can’t be measured reliably, at carrying value of asset given up

SMEs Full IFRSSAME

SAME

Initial Recognition

Depreciation method shall be the best that reflects the consumption of the asset's benefits over its useful life

Useful life is determined by factors such as expected usage, wear & tear, obsolescence, legal limits

Depreciation expense is recognized in P&L (unless it’s part of another asset)

Review of residual value, useful life, depreciation method if indicators of changes in such exist

SMEs Full IFRSSAME

SAME

SAME

Review is done annually

Depreciation

Major parts of an item of PPE have significantly different patterns of consumption of economic benefits must be depreciated separately

SMEs Full IFRSEach part of a PPE with a cost that is significant in relation to the total cost of the item shall be depreciated separately.

Components

  PPE is tested for impairment when there is an indication that the asset may be impaired.

Existence of impairment indicators is assessed at each reporting date.

Compensation for impairment from third parties is included in P&L when compensation becomes receivable

SMEs Full IFRSSAME

SAME

SAME

Impairment

 Plan to dispose of an asset is an indicator of impairment that triggers the calculation of the asset’s recoverable amount for the purpose of determining whether the asset is impaired.

No classification for Non Curren Held For Sale

SMEs Full IFRSEssentialy the same, but there’s an explicit classification of assets held for sale (IFRS 5: Non Current Assets Held for Sale and Discontinued Operations)

Impairment

Carrying amount of PPE shall be derecognised: on disposal; or when no future economic

benefits are expected from its use or disposal.

Gain or loss is recognized in profit and loss Gain or loss is the difference

between the net disposal proceeds and the carrying amount of the item

SMEs Full IFRSSAME

Derecognition

Subsequent measurementSME: Cost ModelFULL: Cost Model and Revaluation

Model Review of depreciation estimates

SME: when indicators of change existFULL: annually

Components approachSME: differences in patterns of

consumptionFULL: significant cost of component

relative to total cost

Key Differences

an identifiable non-monetary asset without physical substance. Such an asset is identifiable when:

(a) it is separable, i.e. capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, asset or liability, or

(b) it arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

Sec 18: Intangible Assets Other than Goodwill

Intangible asset shall be recognized if, and only if: it is probable that the

expected future economic benefits that are attributable to the asset will flow to the entity;

the cost or value of the asset can be measured reliably; and

the asset does not result from expenditure incurred internally on an intangible item.

SMEs Full IFRSSAME except (c)

General Principle for Recognition

Initially at costIf separately acquired

its purchase price; and any directly

attributable cost of preparing the asset for its intended use.

As part of business combination the cost is its FV at the

acquisition date

SMEs Full IFRSSAMESAME

SAME

Initial Measurement

Exchange of AssetsAt FV unless

the exchange transaction lacks commercial substance or

the FV of neither the asset received nor the asset given up is reliably measurable. In that case, the asset’s cost is measured at the carrying amount of the asset given up.

SMEs Full IFRSSAME

Initial Measurement

Internally generated intangible assets All research and

development costs are recognized as an expense

SMEs Full IFRSResearch costs are

expensed as incurred. Development costs are capitalized when specific criteria are met.

Initial Measurement

At cost less any accumulated amortization and any accumulated impairment losses.

SMEs Full IFRSEither the Cost model

or the Revaluation model

Revaluation Model: FV at revaluation date less any accumulated amortization and subsequent accumulated losses

Subsequent Measurement

All intangible assets have finite life

For intangible that arises from contractual/other legal rights Useful life shall not

exceed the period of the contractual or other legal rights, but may be shorter depending on the period over which the entity expects to use the asset.

SMEs Full IFRSCan be either finite

or infiniteSAME

Useful Life

With finite useful life Amortized on the

systematic basis of useful life

If useful life can’t be reliably estimated the life shall be presumed to be ten years.

With infinite useful life Not applicable. All

intangible assets are considered to have finite lives.

SMEs Full IFRS Intangible assets with

finite useful life are amortized. Amortization is carried out on a systematic basis over the useful lives of the intangibles.

With infinite useful life Assets are not

amortized

Useful Life

Allocate the depreciable amount of an intangible asset on a systematic basis over its useful life.

Amortization charge for each period shall be recognized as an expense.

Amortization begins when the intangible asset is available for use

SMEs Full IFRSSAME

SAME

SAME

Amortization Method and Period

Amortization ceases when the asset is derecognized.

The entity shall choose an amortization method that reflects the pattern in which it expects to consume the asset’s future economic benefits.

If the entity cannot determine that pattern reliably, it shall use the straight-line method.

SMEs Full IFRSAt the earlier of the

date that the asset is classified as held for sale and the date that the asset is derecognized.

SAME

SAME

Amortization Method and Period

Assume that the residual value is zero unless:

there is a commitment by a 3rd party to purchase the asset at the end of its useful life, or

there is an active market for the asset and:

RV can be determined by reference to that market, and

it is probable that such a market will exist at the end of the asset’s useful life.

SMEs Full IFRSSAME

Residual Value

Review if there are indicators of change in the values of residual and amortization method

SMEs Full IFRS Review each period

Residual Value

An intangible asset shall be derecognized:

on disposal; or when no future

economic benefits are expected from its use or disposal

SMEs Full IFRS SAME

Retirement and Disposal

RecognitionSME: the asset does not result from

expenditure incurred internally on an intangible item

FULL: development costs may be capitalized

Initial measurement (by way of government grant)SME: FV at the date the grant is received

or receivableFULL: FV or nominal amount plus any

expenditure that is directly attributable to preparing the asset for its intended use.

Key Differences

Initial measurement (internally generated)SME: expensedFULL: development costs are

capitalized when specific criteria are met.

Subsequent measurementSME: At cost less any accumulated

amortization and any accumulated impairment losses.

FULL: Either the Cost model or the Revaluation model

Key Differences

Useful lifeSME: finite lifeFULL: can be either finite or infinite

Amortization periodSME: Amortization ceases when the

asset is derecognized.FULL: At the earlier of the date that the

asset is classified as held for sale and the date that the asset is derecognized.

Key Differences

Residual valueSME: Review if there are indicators of

change in the values of residual and amortization method

FULL: Review each period

Key Differences

Borrowing costs are interest and other costs arising on an entity's financial liabilities and finance lease obligations

Also includes exchange differences arising from foreign currency borrowings to the extent that they are regarded as adjustment to interest cost

Sec 25: Borrowing Costs

All are expensedSMEs Full IFRS

may be capitalized if certain conditions are met (if directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset are capitalised)

Recognition

RecognitionSME: all are expensedFULL: may be capitalized if certain

conditions are met

Key Differences