Non- monetary assets- Intangible assets are non-monetary assets. The non-monetary asset refers to the value of assets which is not fixed by the contract or other ways. Debtors, bill receivables, etc. are the example of monetary assets. The example of non- monetary assets is goodwill as its monetary value can’t be recognized as it is neither a good nor a service. With trademark, patent and copy rights it is also the same. These assets do not have a recognizable value. Some of these assets are generated within the organization.
Physical substance- Intangible assets have no physical substance, however some intangible assets may have physical substance for example compact disk containing computer software but the cost of physical substance is not important as compared to non-physical asset. If the cost of physical substance is more than assets, it will be treated as a fixed asset which is not considered by this standard. This standard is only concerned with the intangible assets and not the tangible assets (Cheung, 2008). It is of paramount importance to the stakeholders that the concerned organization recognizes the right asset as intangible. The recognition criteria for intangible assets have been highlighted below:-
- An intangible asset must have the characteristics of an asset. An asset is used by the organization for generate revenue and is not held by the organization with an intention of selling it.
- Intangible assets are recognized when some probable future economic benefits are assessed from that asset. These future economic benefits should flow towards the organization. It is also of paramount importance that these flows should be reasonably of a predictable nature(Tower and Taylor, 2009).
- For recognizing as an asset in the balance sheet statement, it is essential that the cost of intangible asset can be measured reliably, if the cost cannot be measured reliably, then it cannot be considered as an intangible asset.