ACCA Financial Reporting (F7) Practice Exam

Under IFRS, the recognition of intangible assets is guided by specific criteria outlined in IAS 38, which deals with intangible assets. An intangible asset must be identifiable, meaning it can be separated from the entity or arise from contractual or other legal rights. Additionally, it must be expected to provide future economic benefits to the entity. This expectation typically arises from the asset's potential to generate revenue or lower expenses.

To be recognized on the balance sheet, intangible assets need to meet these criteria at the time of acquisition or development. This includes assets that are internally generated, as long as they meet the definition of an intangible asset and have future economic benefits.

The other choices do not align with the IFRS requirements for recognizing intangible assets:

- The idea of only recognizing intangible assets that are fully amortized does not conform to the recognition principles, as assets can be initially recognized regardless of their amortization status.

- Limiting recognition to assets bought directly from others ignores the possibility of recognizing internally generated intangible assets, such as those developed through research and development activities.

- The requirement for intangibles to have a physical form is incorrect, as intangible assets, by definition, do not have a physical presence. This characteristic distinguishes them from tangible assets, further supporting the necessity