Answer to Question #30957 in Economics for Henna

Question

Do you think the requirements for an active market in relation to intangibles assets is justified? What problems could occur if the active market requirement was not included for intangible assets?

Answer 1

IAS 38 Intangible Assets outlines the accounting requirements for intangible assets, which are non-monetary assets which are
without physical substance and identifiable (either being separable or arising
from contractual or other legal rights). Intangible assets meeting the relevant
recognition criteria are initially measured at cost, subsequently measured at
cost or using the revaluation model, and amortized on a systematic basis over
their useful lives (unless the asset has an indefinite useful life, in which
case it is not amortized).

The objective of IAS 38 is to prescribe the accounting treatment for intangible
assets that are not dealt with specifically in another IFRS. The Standard
requires an entity to recognize an intangible asset if, and only if, certain
criteria are met. The Standard also specifies how to measure the carrying
amount of intangible assets and requires certain disclosures regarding
intangible assets.