Differences between module 18 intangibles SMEs and IAS 38

Within section 18 IFRS for SMEs, updated in 2015 and IAS 38 exist ten differences that we will analyze below:

First Difference: In module 18 of the IFRS for SMEs, research and development expenses on internally generated intangible assets are recognized in profit and loss.

While in IAS 38, development expenses are capitalized as long as all the requirements are met as established in paragraph 57 of this standard.

Second difference: In IAS 38, an entity must recognize intangible assets with indefinite useful lives at cost less impairment losses.

Ie, intangibles with these characteristics must not be amortized.

On the other hand, in module 18 IFRS for SMEs, it is considered that even intangible assets with indefinite useful lives, such as acquired brands, must be amortized over a certain period according to management’s judgment.

Third difference: In the IFRS for SMEs, intangibles in which it is not possible to determine their useful life reliably, it must be calculated based on the best estimate of the future benefits associated with these assets.

However, the estimate of this life useful cannot exceed 10 years.

In the full IFRS, intangibles for which it is not possible to estimate their useful lives are considered assets with indefinite useful lives.

Fourth difference: Paragraph 33 of IAS 38 establishes that an intangible acquired in a business combination will always meet the criteria for the entry of future economic benefits.

This means that assets such as brands, customer lists, or similar items recognized in profit or loss by an acquired entity will become intangible assets of an acquired entity in a business combinations process.

Nevertheless, section 18 IFRS for SMEs determines that the essential criterion for recognizing an intangible in a business combination is that the asset can be measured reliably way without undue cost and effort.

Fifth difference: IAS 38 establishes two models for the subsequent measurement of an intangible, the cost model and the revaluation model.

In contrast, section 18 IFRS for SMEs establishes the cost model in the subsequent measurement.

It is important to clarify that the revaluation model in the full IFRS Standards is applied both for intangibles and for property, plant, and equipment.

However, in the last update of the IFRS for SMEs, the revaluation model only was included in the property plant and equipment.

Ie, in this specific topic, the IFRS for SMEs and the IFRS full are aligned.

Then, it is necessary to wait for a future update of module 18 IFRS for SMEs to establish whether the revaluation model is included as a subsequent measure.

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Sixth difference: IAS 38 requires an annual review of the useful life and, therefore, the amortization period of intangible assets.

Section 18 IFRS for SMEs does not establish this requirement.

In other words, the IFRS for SMEs requires a review of the amortization period if any indication allows evidence that the useful life of an intangible has changed.

Seventh difference: IAS 38 allows intangible assets to be recognized through exchanges of assets.

Full IFRS Standards set out that the intangible assets acquired must be measured at the fair value of the asset received in a commercial exchange transaction.

If it is not possible to determine this value, it will be recognized at the value reasonable amount of the asset given up.

The IFRS for SMEs does not specify how it should recognize this type of transaction, and it even invites you to read the IAS 38 guidelines to apply them in this type of event economics. 

Eighth difference: IAS 38 determines that when the payment of an intangible asset is deferred beyond the normal credit terms, its cost will be the equivalent of the cash price.

The difference between this amount and the total payments will be recognized as an interest expense throughout the loan unless it is capitalized under IAS 23 borrowing costs.

Module 18 IFRS for SMEs does not address this particular topic.  

Ninth difference: In the last update of IAS 38 carried out in 2014, the IASB amended this standard to clarify that recognizing the amortization of intangibles based on an income-based method was not correct.

Remember that paragraph 98 of the IAS 38 establishes that different amortization methods can be used to systematically distribute an asset’s amortization amount over its useful life.

These include the straight-line method, the decreasing depreciation method, and the units of production method.

This amendment could not be included in the last update of the IFRS for SMEs in 2015.

Tenth difference: Finally, the last difference is related to the language used in each standard; it is evident that IFRS uses a more complex phraseology than that used in IFRS for SMEs.


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