Although the company may have identified an intangible asset, recognizing it on the balance sheet is another matter. Before the company may record the asset in its books, the company must be able to demonstrate that the asset meets the definition of an intangible asset and also the recognition criteria for such assets.

According to IAS 38 an intangible asset shall be recognized if, and only if it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and the cost of the asset can be measured reliably. As you may have understood, both those conditions have to be met obviously.

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Plainly speaking, an intangible asset is an identifiable non-monetary asset without physical substance. This should be fairly obvious from the name ‘intangible’. What this means really is the fact that you cannot touch or physically grasp the asset. What however is required prior you can talk of an asset is the requirement of identifiability – the company must be able to separate it from physical substance for an example and it must be ‘usable’ all on its own.

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