1 Ultimate Guide – IFRS vs US GAAP Intangible assets goodwill

IFRS vs US GAAP Intangible assets goodwill

– The comparison starts with an overview of the differences and similarities between IFRS and US GAAP, and followed by more detailed differences and similarities  on a reporting line level.

Standards Reference


Topic 35o Intangibles-Goodwill and Other

Subtopic 610-20 Other income – Gains and losses from the Derecognition of Nonfinancial Assets

Subtopic 720-15 Other expenses – Start-up costs

Subtopic 720-35 Other expenses = Advertising costs

Topic 730 Research and development arrangements

Subtopic 985-20 Software – Costs of software to be sold, leased or marketed

 IAS 38 Intangible assets

SIC-32 Intangible assets – Web site costs

IFRS vs US GAAP Intangible assets goodwill


The following discussion captures a number of the more significant GAAP differences ans similarities under both the above mentioned standards. It is important to note that the discussion is not inclusive of all GAAP differences in this area.

In overview the similarities and differences are as follows:

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Non-monetary transactions IFRS 15 Complete and Exemplary Read

Non-monetary transactions IFRS 15

Barter transactions are the exchange of goods or services, in exchange for other goods or services

IFRS References: IFRS 15, IAS 16, IAS 38, IAS 40 Non-monetary transactions IFRS 15

If an entity enters into a non-monetary exchange with a customer as part of its ordinary activities, then generally it applies the guidance on non-cash consideration in the IFRS 15 Revenue standard. Non-monetary transactions IFRS 15

Non-monetary exchanges with non-customers do not give rise to revenue. If a non-monetary exchange of assets with a non-customer has commercial substance, then the transaction gives rise to a gain or loss. The cost of the asset acquired is generally the fair value of the asset surrendered, adjusted for any cash transferred. Non-monetary transactions IFRS 15

Simple bartering involves no cost as this involves exchanging goods and/or services of the same value.

A barter exchange operates as a broker and bank in which each participating member has an account that is debited when purchasesNon-monetary transactions IFRS 15 are made, and credited when sales are made. Compared to one-to-one bartering, concerns over unequal exchanges are reduced in a barter exchange.

The exchange plays an important role because it provides the record-keeping, brokering expertise and monthly statements to each member. Commercial exchanges make money by charging a commission on each transaction on either the buy or sell side, or a combination of both. Non-monetary transactions IFRS 15

In general, one requirement remains in tact in non-monetary transactions, revenue cannot be recognised if the amount of revenue is not reliably measurable. Non-monetary transactions IFRS 15

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Impairment of intangible assets

Possible impairment of intangible assets has to be assessed on a periodical basis. Intangible assets are tested for impairment when there is indication that they might be impaired. Indicators of impairment include legal restrictions, business restructuring, development of new technology, economic changes, etc. Impairment of intangible assets

Impairment test for intangible assets is the same as that for a tangible fixed asset:

  1. comparing the carrying amount of the asset, and Impairment of intangible assets
  2. the higher of fair value (less cost to sell) and value in use. Impairment of intangible assets

If b) is lower than a) that difference is recognized as impairment. Impairment of intangible assets

Impairment test for goodwill is a little more complex. The goodwill is first … Read more

Complete detection of all IFRS 3 intangibles

Complete detection of all IFRS 3 intangibles explains it all, because detecting intangible assets can be a complex and challenging matter. Strategies to detect identifiable intangible assets vary depending on the facts and circumstances of the business combination and usually require a full review of the transaction. It is important to understand the business of the acquiree, what intangible resources it depends on and how these may translate into identifiable intangible assets. It should be possible to explain the acquired business in terms of the resources it uses to generate profits and how these are reflected in the acquiree’s assets and liabilities. In other words ask the question: what has been paid for?

Use the business case and transaction case Read more

4 proper uses of Residual value

The residual value of an asset is the estimated amount that an entity would obtain from asset disposal, after deducting the estimated costs of disposal

Intangible assets Example

Intangible assets, other than goodwill, include expenditure on the exploration for and evaluation of oil and natural gas resources, computer software, patents, licences and trademarks and are stated at the amount initially recognized, less accumulated amortization and accumulated impairment losses.

Customer relationships Distributor Method

Customer relationships Distributor Method is a valuation model to determine the value of the existing customer relationships portfolio in a business combination

History of intangible assets

History of intangible assets – In November 1983, the International Accounting Standards Committee (IASC) approved the International Accounting Standards IAS 22 ‘Accounting for Business Combinations’ that contained the principles for accounting for goodwill. IAS 22, being concerned with business combinations, does not define goodwill. It also does not address the issues of revaluation of goodwill as well as accounting for internally generated goodwill.

For the purpose of improved international accounting standards (IASs), the IASC issued exposure draft (ED 32) “The Comparability of Financial Statements” in January 1989. ED 32 proposed amendments to IAS 22 as well as other IASs. The draft defined goodwill as the difference between the cost of Read more