Chris John

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Published on: Sep 17, 2026

IAS 38: Intangible Assets

IAS 38: Intangible Assets outlines the accounting requirements for intangible assets. Intangible assets are non-monetary assets without any physical substance and are identifiable. Intangible assets that meet the relevant recognition criteria are initially measured at cost and subsequently measured at a revalued amount or using a revaluation model and amortised systematically over their useful lives. The primary objective of IAS 38 is to prescribe the accounting treatment for intangible assets not explicitly dealt with in another Standard. IAS 38 requires an entity to recognise an asset as intangible if, and only if, specified criteria are met. This article sheds light on IAS 38: Intangible Assets.

Scope of IAS 38

The IAS 38 standard is applied in accounting for intangible assets, except in the following situations:

When intangible assets fall within the scope of a different standard.
For financial assets, as defined in IAS 32 Financial Instruments: Presentation.
For the recognition and measurement of exploration and evaluation assets.
For expenditure on the development and extraction of minerals, oil, natural gas, and other non-regenerative resources.

When another standard prescribes the accounting for a specific type of intangible asset, an entity applies that rule instead of this one. For instance, this Standard does not apply to the following:

Intangible assets held by another entity for sale in the ordinary course of business.
Deferred tax assets.
Leases within the scope of IAS 17 Leases.
Assets that arise from employee benefits.
Financial assets as defined in the IAS 32 Financial Instruments. The IFRS 10 Consolidated Financial Statements cover the recognition and measurement of some financial assets, as well as IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures.
Goodwill acquired in a business combination.
Deferred acquisition costs and intangible assets arising from an insurer's contractual rights under insurance contracts within the scope of IFRS 4 Insurance Contracts.
Non-current intangible assets classified as held for sale under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Intangible Assets

An intangible asset is a non-monetary, identifiable item without any physical substance, under the control of an entity, capable of generating future economic benefits for the entity.

An asset is identifiable under the following conditions:

When an asset is separable, meaning it can be separated or divided from an entity and sold, transferred, licensed, exchanged, or rented, either individually or with a related contract, liability, or identifiable asset, regardless of the entity’s intent to do so.
When an asset arises from any contractual or other legal rights, regardless of whether those rights are transferable or separate from the entity or other rights and obligations.

Effective Date

An entity shall apply this standard for annual periods beginning on or after 1st January 2006. For earlier periods, if the entity uses IFRS 6 Exploration for and evaluation of mineral resources, those amendments shall be applied for that earlier period.

Measurement after Recognition of Assets

An entity has the option to choose either the cost model or the revaluation model as its policy for accounting. When an intangible asset is accounted for using the revaluation model, all other assets in the same class shall also be revalued, unless there is no active market for those assets.

Cost Model

An intangible asset is carried at its cost less any accumulated amortisation and any accumulated impairment losses after initial recognition.

Revaluation Model

After initial recognition of an intangible asset, it shall be carried at a revalued amount—its fair value at the date of revaluation less any subsequent accumulated amortisation and impairment losses. Revaluations shall be conducted regularly to ensure the carrying amount of the intangible asset does not differ materially from its fair value at the reporting date.

When an intangible asset is revalued, its carrying amount is adjusted to the revalued amount. The asset is treated in the following ways at the revaluation date:

The gross carrying amount shall be adjusted in consistency with the revaluation of the carrying amount of the asset.
The accumulated amortisation is eliminated against the gross carrying amount of the asset, and the adjustment amount forms part of the increase or decrease in the carrying amount.

If an intangible asset in a particular class of revalued intangible assets cannot be revalued due to a lack of an active market, it shall be carried at cost less any accumulated amortisation and impairment losses.

Revaluation changes should be accounted for as mentioned below:

If the carrying amount of an intangible asset increases due to revaluation:

The increase shall be recognised in other comprehensive income and accumulated in equity under the revaluation surplus heading; or
The increase shall be recognised in profit or loss to the extent that it reverses a decrease in the same asset's revaluation previously recognised in profit or loss.

If the carrying amount of an asset decreases due to revaluation:

The decrease shall be recognised in profit or loss; or
The decrease shall be recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus concerning that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity under the revaluation surplus heading.

Useful Life

An entity shall assess whether the useful life of an intangible asset is finite or indefinite. If finite, the length or number of production or similar units constituting the useful life is assessed. An intangible asset shall be considered indefinite when no foreseeable limit exists to the period over which the asset is expected to generate net cash inflows for the entity.

The useful life of an asset from contractual or legal rights should not exceed the period of those rights but may be shorter, depending on the expected use by the entity. If contractual rights are conveyed for a limited period that may be renewed, the useful life of the intangible asset includes the renewal period(s) only if there is evidence to support renewal by the entity without significant cost. The useful life of an asset that is reacquired and recognised as an intangible in a business combination is the remaining contractual term of the granting contract and shall not include renewal periods.

Determination of Useful Life of an Asset

The following factors need to be considered when determining the useful life of a certain intangible asset:

The expected usage of an asset by an entity and if the asset could be managed efficiently by another management team.
The typical product life cycle for an asset and public information on estimates of the useful lives of similar assets that are similarly used.
The technical, technological, commercial, or other types of obsolescence.
The stability of the industry where an asset is assigned, and market demand changes for the services or products output from the asset.
The expected actions by other competitors or potential competitors.
The level of maintenance expenditure required to achieve expected future economic benefits from the asset and the entity’s ability and intention to reach that level.
The period of control over an asset and the legal or similar limits on asset use, such as lease expiry dates.
Whether the useful life of an asset depends on other assets' useful lives within the entity.

Indefinite Useful Lives of Intangible Assets

An intangible asset with an indefinite useful life shall not be amortised. According to IAS 36 Impairment of Assets, an entity must test an intangible asset with an indefinite useful life for impairment by comparing its recoverable amount with its carrying amount:

Annually, and
If there is an indication that the intangible asset may be impaired.

Review of the Useful Life Assessment:

The useful life of a non-amortised intangible asset must be reviewed each period to determine if the events and circumstances continue to support an indefinite useful life assessment. If they do not, the change from indefinite to finite useful life is treated as a change in an accounting estimate as per IAS 8 Accounting Policies, Changes in Estimates and Errors.

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Frequently Asked Questions

Common questions about IAS 38 Intangible Assets: Accounting Standards Guide.

IAS 38 applies to accounting for intangible assets, except in certain situations where they are covered by other standards or fall outside its scope, such as financial assets, exploration and evaluation assets, deferred tax assets, goodwill acquired in a business combination, and certain insurance-related intangible assets.

An intangible asset is a non-monetary, identifiable asset without physical substance that is controlled by an entity and capable of generating future economic benefits. It must be separable or arise from contractual or legal rights.

IAS 38 requires an entity to recognize an intangible asset only if specified criteria are met, such as the ability to identify the asset, control over the asset, and the expectation of future economic benefits from the asset.

IAS 38 allows entities to choose between the cost model or the revaluation model for subsequent measurement of intangible assets. The cost model requires carrying the asset at cost less accumulated amortization and impairment losses, while the revaluation model requires carrying it at fair value less subsequent amortization and impairment.

IAS 38 requires entities to assess whether an intangible asset has a finite or indefinite useful life. Various factors, such as legal rights, obsolescence, and maintenance expenditure, should be considered in determining the useful life of an intangible asset.

Intangible assets with indefinite useful lives are not amortized but tested for impairment annually or whenever there is an indication of impairment, following the guidance of IAS 36: Impairment of Assets.

If the carrying amount of an intangible asset increases due to revaluation, the increase is recognized in other comprehensive income and accumulated in equity under the revaluation surplus heading. If it decreases, the decrease is recognized in profit or loss or other comprehensive income to the extent of any credit balance in the revaluation surplus.

IAS 38 does not cover the accounting for goodwill acquired in a business combination. However, it provides guidance on recognizing and measuring other intangible assets acquired in a business combination, such as the remaining contractual term of reacquired rights.

IAS 38 became effective for annual periods beginning on or after January 1, 2006. If an entity applies IFRS 6: Exploration for and Evaluation of Mineral Resources earlier, the related amendments to IAS 38 should also be applied for that earlier period.

IAS 38 requires intangible assets with finite useful lives to be amortized on a systematic basis over their estimated useful lives. The amortization method should reflect the pattern in which the asset's future economic benefits are expected to be consumed by the entity.