Intangible assets are initially recorded at cost and are subsequently stated at cost less any accumulated amortisation and impairment losses. The cost of internally generated intangible assets comprises directly attributable costs of labour, both director's and employees', necessary to generate the asset.
Expenditures on research or on the research phase of an internal project are recognised as an expense when incurred. The intangible assets arising from the development phase of an internal project are recognised if, and only if, the following conditions apply:
- it is technically feasible to complete the asset for use
- the company has the intention of completing the asset for either use or resale
- the company has the ability to either use or sell the asset
- it is possible to estimate how the asset will generate income
- the company has adequate financial, technical and other resources to develop and use the asset; and
- the expenditure incurred to develop the asset is measurable.
If no intangible asset can be recognised based on the above, then development costs are recognised in profit and loss in the period in which they are incurred.
Intangible assets are amortised from the date they are available for use. Amortisation is charged to profit or loss on a straight-line basis over the 6 year estimated useful life of the intangible asset. These charges are included in the Statement of Profit and Loss.
Any intangible assets carried at revalued amounts are recorded at the fair value at the date of revaluation, as determined by reference to an active market, less any subsequent accumulated amortisation and subsequent accumulated impairment losses.
Impairment of Intangible Assets
The Company assesses annually whether there is any indication that any of its assets have been impaired. If such indication exists, the asset’s recoverable amount is estimated and compared to its carrying value. Where it is impossible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the smallest cash generating unit to which the asset is allocated.
If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, an impairment loss is recognised immediately in profit or loss, unless the asset is carried at a revalued amount, in which case the impairment loss is recognised as a revaluation decrease.
For intangible assets not yet available for use, the recoverable amount is estimated annually and at the end of each reporting period if there is an indication of impairment