Chapter 4 Intacc

1) is an identifiable non-monetary asset without physical substance.
To qualify as intangible asset, an item must meet all of the following

definition criteria:
1.
2.
3.
2) This means that the asset is capable of being separated from the entity
and sold, transferred, licensed, rented or exchanged, either individually or together with a
related contract, asset or liability.
This is regardless of whether those rights are transferable or separable from the entity or
from other rights and obligations.
3) is the power of the entity to obtain the future economic benefits flowing
from the intangible asset and restricts the access of others to those benefits. The entity must be
able to enjoy the future economic benefits from the asset and prevent others from enjoying the
same benefits.
EXAMPLES OF INTANGIBLE ASSETS
1 6
2 7
3 8
4 9
4) is an exclusive legal right granted by the government for an invention to

prevent others from making, using, selling or distributing an invention without permission from
the patentee.
5) is another intellectual property right or protection granted to an author of

literary, musical or artistic work for the publication, distribution and adaptation of that work
6) are words, names, symbols or other devices used in trade to indicate the
source of a product and to distinguish it from products of others.
7) identifies and distinguishes the source of a service rather than a product.
8) are used to identify the goods or services of a member of a group.
9) are used to certify the geographical origin or other characteristic of a good or service.
10) is a right granted by one party (called franchisor) to another party (called the
franchisee) to operate outlets using business concepts, property, trademarks and trade names
owned by the franchisor for a specified period.
11) includes import duties and non-refundable purchase taxes, after deducting
trade discounts and rebates.
12) refers to the original and planned investigation undertaken with the prospect
of gaining new scientific or technical knowledge and understanding.
13) refers to the application of research findings or other knowledge to a plan or

design for the production of new or substantially improved materials devices, products,
processes, systems or services before the start of commercial production or use.
14) Illustration:
Assume that the ABC Corporation is developing a new production process for the
formulation of a new product. Research costs incurred were P500,000. Total costs incurred in
the development phase is P540,000, P260,000 of which is incurred before October 15, 2019.
On October 15, 2019, technological and commercial feasibility was established. The company
was able to demonstrate how the new product will be manufactured and sold by the entity. The
cost of registering the patent related to the product is P30,000.
15) Illustration:
During 2018, the company spent P180,000 for research and development of patent,
P80,000 of which was development cost incurred after establishing technical and commercial
feasibility. The enterprise was able to determine how the patent would be used in the production
process. On January 1, 2019, the enterprise paid P15,000 to apply for and obtain rights to the
patent. The estimated life of the patent was ten years. At the beginning of 2021, the company
paid P72,000 in successfully prosecuting an attempted infringement of its patent rights.
On January 1, 2022, XYZ paid P60,000 for a competing patent. This patent will not be
used but was acquired to protect its existing patent.
16) is the systematic allocation of the amortizable amount of an intangible asset
over their useful life.
17) To illustrate accounting for computer software development costs, assume that during 2019,
Pitt Corporation incurred costs to develop and produce a routine, low-risk computer software
product, as follows:
Completion of detailed program design P130,000
Costs incurred in coding and testing to establish
technological feasibility 100,000
Other coding costs after establishment of technological
feasibility 240,000
Other testing costs after establishment of technological
feasibility 200,000
Cost of producing product masters for training materials 150,000
Duplication of computer software and training materials
from product masters (1,000 units) 250,000
Packaging products (500) 90,000
18) It had been traditionally included among the intangible asset although it does not
possess the characteristic of being identifiable.
19) To illustrate goodwill acquired in a business combination, assume the following data for
ABC Company:
Carrying Amount Fair Value
Receivables P 500,000 P 400,000
Inventory 1,000,000 1,200,000
Property, Plant and Equipment 5,000,000 6,200,000
Patents 700,000 500,000
Total Assets P7,200,000 P 8,300,000
Current Liabilities P 800,000 P 800,000
Non-current liabilities 3,500,000 3,900,000
Total Liabilities P4,300,000 P4,700,000
Net Assets P2,900,000 P 3,600,000
On this date, DEF Corporation acquired the net assets of ABC Company in exchange for
P4,000,000 in cash.
20) is the higher of the cash generating unit's fair value less cost to sell and value in use.
21) is the excess of its carrying value over its recoverable amount.
22) Illustration:
Assume the following carrying values of a group of assets that is identified as a cash
generating unit.
Property, plant and equipment, net of
accumulated depreciation P 510,000
Patents, net of accumulated amortization 170,000
Goodwill 120,000
Total P 800,000
Case 1. Assume that the group's recoverable amount is determined to be P700,000.
23) Case 2. Assume that the group's recoverable amount is only P600,000.

Chapter 4 Intacc

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Chapter 4 Intacc

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1) is an identifiable non-monetary asset without physical substance.

To qualify as intangible asset, an item must meet all of the following

EXAMPLES OF INTANGIBLE ASSETS

4) is an exclusive legal right granted by the government for an invention to

5) is another intellectual property right or protection granted to an author of

7) identifies and distinguishes the source of a service rather than a product.

8) are used to identify the goods or services of a member of a group.

13) refers to the application of research findings or other knowledge to a plan or

Completion of detailed program design P130,000

Costs incurred in coding and testing to establish

technological feasibility 100,000

Other coding costs after establishment of technological

Other testing costs after establishment of technological

Cost of producing product masters for training materials 150,000

Duplication of computer software and training materials

from product masters (1,000 units) 250,000

Packaging products (500) 90,000

Carrying Amount Fair Value

Receivables P 500,000 P 400,000

Inventory 1,000,000 1,200,000

Property, Plant and Equipment 5,000,000 6,200,000

Patents 700,000 500,000

Total Assets P7,200,000 P 8,300,000

Current Liabilities P 800,000 P 800,000

Non-current liabilities 3,500,000 3,900,000

Total Liabilities P4,300,000 P4,700,000

Net Assets P2,900,000 P 3,600,000

Property, plant and equipment, net of

accumulated depreciation P 510,000

Patents, net of accumulated amortization 170,000

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