Exposure Draft Accounting Standard (AS) 38 Intangible Assets
Accounting Standard (AS) 38
(The Indian Accounting Standards (Ind AS), as notified by the Ministry of Corporate Affairs in February, 2015, have been applicable to the specified class of companies. For other class of companies, i.e., primarily the unlisted companies having net worth less than Rs. 250 crores, Accounting Standards, as notified under Companies (Accounting Standards) Rules, 2006, have been applicable. However, the Ministry of Corporate Affairs has requested the Accounting Standards Board of the Institute of Chartered Accountants of India (ICAI) to upgrade Accounting Standards, as notified under Companies (Accounting Standards) Rules, 2006, to bring them nearer to Indian Accounting Standards. Accordingly, the Accounting Standards Board (ASB) of ICAI has initiated the process of upgradation of these standards which will be applicable to all companies having net-worth less than Rs. 250 crores including non-corporate entities.
In this direction, the ASB has finalised AS 38, Intangible Assets. For formulating AS 38 Ind AS 38, Intangible Assets, has been taken as the base. Major differences between draft AS 38 and Ind AS 38 are given in Appendix 1 of the AS 38. Similarly, major differences between draft AS 38 and AS 26 are given in Appendix 2 of AS 38.
Following is the Exposure Draft of the Accounting Standard (AS) 38, Intangible Assets, issued by the Accounting Standards Board of the Institute of Chartered Accountants of India, for comments. The Board invites comments on any aspect of this Exposure Draft. Comments are most helpful if they indicate the specific paragraph or group of paragraphs to which they relate, contain a clear rationale and, where applicable, provide a suggestion for alternative wording.
How to Comment
Comments can be submitted using one of the following methods so as to receive not later
than November 2, 2018:
1. Electronically: Visit the link http://www.icai.org/comments/asb/
2. Email: Comments can be sent at firstname.lastname@example.org
3. Postal: Secretary, Accounting Standards Board,
The Institute of Chartered Accountants of India, ICAI Bhawan,
Post Box No. 7100, Indraprastha Marg, New Delhi – 110 002
Further clarifications on any aspect of this Exposure Draft may be sought by email to
Accounting Standard (AS) 38
(This Accounting Standard includes paragraphs set in bold type and plain type, which have equal
authority. Paragraphs in bold type indicate the main principles.)
1 The objective of this Standard is to prescribe the accounting treatment for intangible assets that are not dealt with specifically in another Standard. This Standard requires an entity to recognise an intangible asset if, and only if, specified criteria are met. The Standard also specifies how to measure the carrying amount of intangible assets and requires specified disclosures about intangible assets.
2 This Standard shall be applied in accounting for intangible assets, except:
(a) intangible assets that are within the scope of another Standard;
(b) financial assets, as defined in AS 109 , Financial Instruments;
(c) the recognition and measurement of exploration and evaluation assets;
(d) expenditure on the development and extraction of minerals, oil, natural gas and similar non-regenerative resources, and
(e) intangible assets arising in insurance entity from contracts with policyholders.
3 If another Standard prescribes the accounting for a specific type of intangible asset, an entity applies that Standard instead of this Standard. For example, this Standard does not apply to:
(a) intangible assets held by an entity for sale in the ordinary course of business (see AS 2, Inventories, and AS 11, Construction Contracts).
(b) deferred tax assets (see AS 12, Income Taxes).
(c) leases that are within the scope of AS 17, Leases.
(d) assets arising from employee benefits (see AS 19, Employee Benefits)
(e) financial assets as defined in AS 109. The recognition and measurement of some financial assets are covered by AS 110, Consolidated Financial Statements, AS 27, Separate Financial Statements, and AS 28, Investments in Associates and Joint Ventures.
(f) goodwill acquired in a business combination (see AS 103, Business Combinations).
(g) [Refer Appendix 1].
(h) non-current intangible assets classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with AS 105, Non-current Assets Held for Sale and Discontinued Operations.
(i) [Refer Appendix1].
4. Some intangible assets may be contained in or on a physical substance such as a compact disc (in the case of computer software), legal documentation (in the case of a licence or patent) or film. In determining whether an asset that incorporates both intangible and tangible elements should be treated under AS 16, Property, Plant and Equipment, or as an intangible asset under this Standard, an entity uses judgement to assess which element is more significant. For example, computer software for a computer-controlled machine tool that cannot operate without that specific software is an integral part of the related hardware and it is treated as property, plant and equipment. The same applies to the operating system of a computer. When the software is not an integral part of the related hardware, computer software is treated as an intangible asset.
5. This Standard applies to, among other things, expenditure on advertising, training, start-up, research and development activities. Research and development activities are directed to the development of knowledge. Therefore, although these activities may result in an asset with physical substance (eg a prototype), the physical element of the asset is secondary to its intangible component, ie the knowledge embodied in it.
6. In the case of a finance lease, the underlying asset may be either tangible or intangible. After initial recognition, a lessee accounts for an intangible asset held under a finance lease in accordance with this Standard. Rights under licensing agreements for items such as motion picture films, video recordings, plays, manuscripts, patents and copyrights are excluded from the scope of AS 17, and are within the scope of this Standard.
7. Exclusions from the scope of a Standard may occur if activities or transactions are so specialised that they give rise to accounting issues that may need to be dealt with in a different way. Such issues arise in the accounting for expenditure on the exploration for, or development and extraction of, oil, gas and mineral deposits in extractive industries and in the case of insurance contracts. Therefore, this Standard does not apply to expenditure on such activities and contracts. However, this Standard applies to other intangible assets used (such as computer software), and other expenditure incurred (such as start-up costs), in extractive industries or by insurers.
7AA. The amortisation method specified in this Standard does not apply to an entity that opts to amortise the intangible assets arising from service concession arrangements in respect of toll roads recognised in the financial statements for the period ending immediately before the beginning of the first upgraded AS reporting period as per the exception given in AS 101.
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