So you are preparing financial statements but aren’t sure what assets go where? Sometimes how assets are classified on a statement can have certain implications, so read on to learn about what ‘intangible assets’ are.
What are the AASBs?
The Australian Accounting Standards Board, a Federal Government agency, sets standards for financial reporting by companies in Australia, covering everything from the structure of a financial report, what needs to be reported and how to report them. Compliance with the Standards is required under the Corporations Act and companies may be prosecuted by regulating authorities.
To ensure that you are compliant with your financial reporting obligations, you should seek legal guidance from a business lawyer.
Who needs to comply?
Essentially it is for companies who are reporting entities – that is, those who reasonably expect users to rely on their reports – public companies.
What is AASB 138?
One of the many important accounting standards is AASB 138 regarding most intangible assets. For an asset to be reported as intangible, it needs to pass some tests:
What are the implications?
If assets are not recognised, they may have to be expensed which will affect your bottom line and hence your taxable profit. Further, the way you classify an asset may mean the market value of your company may be higher than the book value (as such items that do not classify as either a tangible or intangible asset will likely be put under ‘good will’, which is not recognised on the financial statements).
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