| Treasurer’s Instruction No | 306 |
| Title | Intangible Assets |
| Effective date | I July 2005 |
| Objective and Background | Provides guidance in respect of accounting for intangible assets |
| Last Reviewed Date | 1 July 2005 |
| PDF Version |  |
This Instruction was previously known as Treasurer's Instruction No 914 - Intangible Assets.
Black letter (or bold) items within these Instructions are mandatory and other plain font items are instructional or for the purpose of providing guidance only.
BACKGROUND
AASB 138 Intangible Assets prescribes the accounting treatment for intangible assets. An intangible asset is a non-monetary asset without physical substance that is:
- capable of being separated from the entity and sold, transferred, rented or exchanged with a related contract, asset or liability; or
- arise from a contractual or other legal right.
Computer software is a common intangible asset. Other potential intangible assets include patents, copyrights, and franchising and marketing rights.
Under AASB 138, internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets. These items cannot be distinguished from the cost of developing a business as a whole.
| (1) | An agency shall determine a capitalisation threshold for its intangible assets.
Computer software will be the most common and material intangible asset held within the public sector. Computer software may be purchased off-the-shelf, or internally developed by an Agency.
The capitalisation threshold for intangible assets will vary with the size of the agency and the category of intangible asset. As a rule of thumb, $50 000 is a reasonable threshold for computer software.
Bulk purchases of the same or similar computer software meeting the recognition criteria, and in total exceeding the capitalisation threshold, should be capitalised. |
| (2) | After initial recognition, each class of intangible asset shall be accounted for using: |
 | (a) | The revaluation model where there is an active market for that class of asset; or |
| (b) | The cost model in the absence of an active market. |
| (3) | The maximum useful life of computer software is five years.
The standard requires that an entity estimates the useful life of an intangible asset.
The useful life over which intangible assets are amortised should reflect the estimated length of time over which benefits will be obtained from use of the asset. For computer software, given the high rate of obsolescence, the maximum useful life is five years. |
| (4) | An Agency shall record all intangible assets, including computer software, on its asset register. |
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