In accounting, assets tend to have at least two major groups that use separate accounting standards: tangible and intangible assets. The first group represents any item that has physical presence, while the latter group cannot be seen or touched. IFRS intangible assets standards have strict requirements for how a company should value and account for these items. The best tips for IFRS intangible assets include documents to ensure the intangible asset is identifiable, initial cost recognition for the asset, and then the selection of the cost or revaluation model for intangible asset accounting. Other rules may exist for certain assets in this group based on given situations.
Assets — even those in the intangible asset class — must be identifiable by the company and other individuals or businesses. The only unidentifiable asset a company can typically have is goodwill; failure to identify an IFRS intangible asset properly may move the asset type into this class. Specific documents must be available to document both the existence of an asset and its ownership by the company. Failure to prove these two items for any intangible asset can result in the company being unable to place it on their accounting books. Third-party documents that document ownership and existence are usually the best proof for IFRS intangible assets.
Like most assets, IFRS intangible assets are typically recorded at cost on the company’s books. The cost of an intangible asset is basically what the company paid for it at the time of purchase plus a few allowed fees under IFRS guidelines. The normal initial recognition process for this asset class is a journal entry that debits an asset account and credits to either cash or accounts payable. This places the asset on the company’s books, with the asset going onto the balance sheet at its cost. Going forward, the company needs to select either the cost or revaluation method for future accounting adjustments to the intangible asset.
The cost model for IFRS intangible assets may require the use of amortization for recognizing their use. Amortization only applies to intangible assets that do not have indefinite life. IFRS intangible assets typically have guidelines for the selection of amortization methods and how a company should record them on their accounting books. The revaluation method requires companies to revalue intangible assets after a period of time. This changes the value of the asset on the books and creates a more accurate value listed on the balance sheet.