Difference between recognition of intangible assets and goodwill

Difference between recognition of intangible assets and goodwill

Question

Goodwill

Advising Kant on whether the above items should be accounted for as intangible assets under small business IFRS and discussing the main reconciliation with the accounting for the recognition of intangible assets other than goodwill under small business IFRS. Discuss any differences.

Answer

Yes, the domain name owned by Bento can be used by the buyer for his five years, so the items referred to in this case are ” should be considered an intangible asset. In accordance with IAS 38 of IFRS, the criteria for recognition and determination of intangible assets are specified and required to be disclosed. Under IFRS, intangible assets are identifiable non-monetary assets that do not exist physically. Such assets are identifiable when they are distinguishable or apparent from regulatory or other legal documents. It can be sold, licensed and transferred. So in this case the domain name is being used to generate revenue, and it’s also for 5 years. This is the type of contract a buyer can use. In summary, this area is considered an intangible asset and is reported on the asset side of the balance sheet.

A general question arises here, why is there a difference between business and goodwill and other things. Intangible assets, even if neither physically exists. According to IFRS and SMEs, there is a big difference between intangible assets and goodwill. Now let’s move on to a brief explanation of what goodwill is and the need to understand the concept of intangible assets.

According to International Financial Reporting Standards and Small and Medium Enterprises, goodwill is: Intangible assets as a miscellaneous category. It is difficult to judge directly which one. Customer loyalty, brand reputation and other non-quantifiable assets are also considered goodwill. Under IFRS, goodwill has a useful life and therefore, like other intangible assets, it cannot exist in isolation, be acquired or transferred. Goodwill is recorded on the balance sheet when two or more companies are in a situation to merge. According to IFRS and SMEs, any amount in excess of the calculated net worth of the covered assets is recovered and becomes goodwill of the respective companies (Johansson, Hjelström & Hellman 2016).

This is art. An identifiable asset that does not physically exist. Copyrights, patents, licenses, agreements and website domains are examples of other intangible assets. The value can be estimated and can be sold or bought for the company (MartínezâTorres 2014).

When accounting for goodwill and intangible assets, there are slight differences between them. Goodwill is a premium paid based on the actual value of the underlying assets at the time of acquisition and therefore cannot be sold. Intangible assets, on the other hand, can be transferred or exchanged independently within the company. Intangible assets have a defined useful life, whereas goodwill has an indefinite useful life (Carvalho, Rodrigues, Ferreira 2016).

References

Johansson, S.E., Hjelström, T., and Hellman, N., 2016. Accounting for goodwill under IFRS: a key analysis. Journal of International Accounting, Auditing and Taxation, 27, pp. 13-25.

MartínezâTorres, M.D.R., 2014. Identification of intangible assets in knowledge-based organizations using concept mapping techniques. R&D Management, 44(1), pp. 42-52.

Carvalho, C., Rodrigues, A.M. and Ferreira, C., 2016. Recognition of Goodwill and Other Intangible Assets in Business Combinations – The Case of Portugal. Australian Accounting Review, 26(1), pp. 4-20.