Ind AS 38: Intangible Assets

Standard orientation

What Ind AS 38 is designed to achieve

Prescribe the accounting treatment for identifiable non-monetary assets without physical substance that are not specifically dealt with by another Ind AS.

Scope: Applies to intangible assets except financial assets, exploration and evaluation assets, mineral rights and expenditure governed by another standard. It also addresses research, development, advertising, training and start-up expenditure.

Identifiability

The resource is separable or arises from contractual or legal rights.

Control

The entity obtains benefits and can restrict others' access.

Internal projects

Research is expensed; development is capitalised only after all criteria are demonstrated.

Useful life

Finite assets are amortised; indefinite assets are tested annually for impairment.

Full standard map

Paragraph-by-paragraph register

Paragraphs	Requirement and simple decode
1	Objective Sets recognition, measurement and disclosure requirements for intangible assets.
2–7	Scope Explains exclusions and interaction with financial instruments, leases, insurance, exploration, held-for-sale and other standards.
8	Definitions Defines active market, amortisation, carrying amount, cost, development, fair value, intangible asset, research, residual value and useful life.
9–17	Core definition Requires identifiability, control and probable future economic benefits; physical substance may be incidental.
18–23	Recognition principle Recognise only when benefits are probable and cost is reliably measurable, using reasonable supportable assumptions.
24	Initial measurement Measure an intangible asset initially at cost.
25–32	Separate acquisition Include purchase price and directly attributable preparation costs; exclude financing, launch, training, administration and initial losses.
33–37	Business combinations Recognise identifiable acquired intangibles separately from goodwill at acquisition-date fair value.
38–41	Fair-value evidence Use active market prices or valuation techniques and probability-weighted cash flows where appropriate.
42–43	Acquired in-process R&D Recognise acquired IPR&D when identifiable; subsequent expenditure follows the research/development rules.
44	Government grant acquisition Apply Ind AS 20 measurement and recognition principles.
45–47	Asset exchanges Use fair value when commercial substance and reliable measurement exist; otherwise use carrying amount.
48–50	Internally generated goodwill Do not recognise because it is not identifiable and cost cannot be measured reliably.
51–53	Internal project phases Separate research and development; if separation is impossible, treat all expenditure as research.
54–56	Research phase Expense as incurred because future benefits cannot yet be demonstrated.
57	Development criteria Capitalise only after technical feasibility, intention, ability, probable benefits, resources and reliable cost measurement are all demonstrated.
58–64	Evidence and prohibited items Use business, market, resource and cost evidence; internally generated brands, mastheads, titles, customer lists and similar items are prohibited.
65–67	Internally generated cost Capitalised cost begins only when all recognition criteria are met; previously expensed amounts cannot be reinstated.
68–71	Expense items Expense start-up, training, advertising, promotional, relocation and reorganisation expenditure, subject to prepaid-service treatment.
72–75	Subsequent policy Choose cost or revaluation model for an entire class; revaluation requires an active market.
76–87	Revaluation mechanics Revalue regularly, treat increases/decreases consistently with revaluation principles and transfer surplus directly within equity.
88–96	Useful-life assessment Classify as finite or indefinite using legal, economic, technological, market and renewal factors.
97–106	Finite-life assets Amortise from available-for-use date, normally with zero residual value; review life and method annually.
107–110	Indefinite-life assets Do not amortise; test annually for impairment and reassess indefinite classification.
111	Impairment Apply Ind AS 36.
112–117	Derecognition Derecognise on disposal or when no future benefits are expected; gain or loss goes to profit or loss.
118–128	Disclosures Disclose lives, methods, reconciliation, material assets, restrictions, commitments, R&D expense and revaluation data.
129–132	Transition history Apply current notified text and Ind AS 101 where relevant.

Major areas decoded

Technical requirements in simple language

Research-development boundary

Capitalisation starts only when all paragraph 57 criteria are demonstrated; success cannot be used to backdate an asset.

Control and identifiability

Employee skill, customer loyalty and market share usually fail recognition without enforceable rights and separable value.

Software and cloud arrangements

Owned software may qualify; many SaaS configuration and customisation costs are services or prepayments.

Useful-life judgement

Legal term, renewals, technology, product cycles, maintenance and dependence on other assets all matter.

Active-market hurdle

Unique brands and patents rarely trade in homogeneous, frequent and publicly priced markets.

Business combinations

Acquired technology, brands and customer relationships may be recognised even though the acquiree expensed them internally.

Visual learning

Finin2min decision map

Exceptions

What professionals overlook

Internally generated goodwill is never recognised.
Internally generated brands, mastheads, publishing titles and customer lists are prohibited.
Research expenditure is always expensed.
Development capitalisation is prospective from the date all criteria are met.
Previously expensed expenditure cannot be reinstated.
Residual value is usually zero unless a commitment or active market supports otherwise.
Indefinite does not mean infinite and must be reassessed.
Revaluation requires an active market and applies to the whole class.

Practical application

Transaction examples

Fact

Treatment

Reason

Purchased patent

Recognise at cost

An identifiable contractual right has a reliable acquisition cost.

Early laboratory investigation

Expense

It is research and future benefits cannot yet be demonstrated.

Development after all six criteria

Capitalise prospectively

Recognition begins only from the demonstration date.

ERP training

Expense

Training does not create a controlled intangible resource.

Internally generated customer list

Expense

Recognition is specifically prohibited.

Indefinite broadcasting licence

No amortisation if supported

Test annually for impairment and reassess the life.

Accounting mechanics

Illustrative journal entries

Purchased intangible

Dr Intangible asset Cr Cash / Payable

Research expenditure

Dr Research expense Cr Cash / Payable

Qualifying development

Dr Intangible asset under development Cr Payroll / Cash / Payable

Amortisation

Dr Amortisation expense Cr Accumulated amortisation

Exam and boardroom

Applied case studies

1. Capitalisation date

Applied case

Technical feasibility is proven on 1 October, but funding and market evidence exist only from 1 December.

Finin2min analysis: Capitalise from 1 December. Earlier expenditure remains expensed.

2. Cloud implementation

Applied case

Configuration relates to supplier-controlled SaaS and the customer receives no separate code.

Finin2min analysis: Usually a service or prepayment unless a separately controlled resource exists.

3. Renewable licence

Applied case

A ten-year licence is routinely renewable at insignificant cost with no foreseeable cash-flow limit.

Finin2min analysis: An indefinite useful life may be supportable, subject to annual reassessment and impairment.

4. Acquired customer relationships

Applied case

The acquiree never recognised relationships but they can be separately valued.

Finin2min analysis: Recognise separately from goodwill at acquisition-date fair value when identifiable.

5. Advertising campaign

Applied case

A ₹30 crore launch is expected to benefit sales for three years.

Finin2min analysis: Expense when services are received; expected benefit alone does not create an intangible asset.

Global comparison

Ind AS versus IFRS and US GAAP

Topic	Ind AS	IFRS	US GAAP
Research	Expensed.	Same under IAS 38.	US GAAP generally expenses R&D.
Development	Capitalised after strict criteria.	Broadly aligned.	Generally expensed except software and specialised guidance.
Revaluation	Only with active market.	Same.	Generally prohibited.
Indefinite life	No amortisation; annual impairment.	Broadly aligned.	No amortisation; annual impairment.
Internal brands	Prohibited.	Prohibited.	Generally not recognised.

Implementation

Stakeholder implications

CFO

Approve stage gates, useful lives and impairment controls.

R&D/Product

Maintain feasibility, funding, market and cost evidence.

Technology

Assess control in software and cloud arrangements.

Tax

Track book capitalisation, tax deductions and deferred tax.

Audit committee

Challenge aggressive capitalisation and indefinite lives.

Watchlist

Common errors

Capitalising research because success is expected.
Backdating development capitalisation.
Recognising internally generated brands.
Capitalising training, advertising or start-up costs.
Treating every SaaS cost as software.
Using unsupported residual value.
Failing annual impairment of indefinite assets.
Using revaluation without active market.
Amortising before available for use.
Failing to separate acquired intangibles from goodwill.

Finin2min Q&A

Frequently asked questions

1. When can development be capitalised?

Only after all six recognition criteria are demonstrated.

2. Can research costs be reinstated later?

No.

3. Can customer loyalty be an internal intangible?

Usually not because control and reliable measurement are absent.

4. Can useful life be indefinite?

Yes when no foreseeable limit exists, subject to annual reassessment.

5. Can a brand be revalued?

Only if an active market exists, which is very rare.

6. Are cloud implementation costs always intangible?

No; many are services or prepayments.

Two-minute revision

Finin2min cheat sheet

IDENTIFY → CONTROL → BENEFIT → MEASURE → RESEARCH EXPENSE / DEVELOPMENT TEST → LIFE → IMPAIR

Validation register

Primary sources

ICAI Compendium 2025–26Primary or authoritative validation source.
Open source ↗

ICAI Educational Material — Ind AS 38Primary or authoritative validation source.
Open source ↗

IFRS Foundation — IAS 38Primary or authoritative validation source.
Open source ↗

FASB CodificationPrimary or authoritative validation source.
Open source ↗