Trademarks & Licences

Brand identifiers, trade names, and contractual rights to use specific assets or processes.

Arabic (قياس) for one of the secondary sources of shari’a which involves likening a case for which there is an explicit text-based shari’a ruling (hukm) with a new matter for which there is no explicit legal text (nass), with both sharing the same underlying cause or ratio legis (or ‘illah in Arabic). Simply put, qiyas (analogy) is based on the application of the injunction of one case to another provided both have the same effective reason. This implies the extension of shari’a value from an original case (asl) to a “similar” new case (far’e). Jurists resort to qiyas only if a ruling to the new case is not found in the Quran or the Sunnah, or even if thereto exists no definite ijma’a. In this sense, qiyas (Islamic analogy) contributes heavily to the derivation of new rulings and solutions for newly-emerging matters and problems that have not been raised as yet.

For example, the Quran forbids the sale and purchase of goods at the time of Friday prayer (specifically after the last call for prayer). By qiyas, this prohibition is generalized and extended to all kinds of transactions since the same ‘illah (abandonment of prayer) is available in both cases.
عربی (قیاس) شریعت کے ثانوی ماخذوں میں سے ایک کے لیے جس میں کسی ایسے معاملے کو تشبیہ دینا شامل ہے جس کے لیے واضح متن پر مبنی شرعی حکم (حکم) کو کسی نئے معاملے سے تشبیہ دی جائے جس کے لیے کوئی واضح قانونی متن موجود نہ ہو۔ , دونوں ایک ہی بنیادی وجہ یا تناسب legis (یا عربی میں ‘اللہ) کے اشتراک کے ساتھ۔ سیدھے الفاظ میں قیاس (مشابہت) ایک مقدمے کے حکم کے دوسرے معاملے پر اطلاق پر مبنی ہے بشرطیکہ دونوں کی ایک ہی موثر وجہ ہو۔ اس کا مطلب یہ ہے کہ شرعی قدر کی اصل صورت (asl) سے ایک “مماثل” نئی صورت (فار’ میں توسیع)۔ فقہاء صرف اس صورت میں قیاس کا سہارا لیتے ہیں جب قرآن و سنت میں نئے مقدمے کا کوئی حکم موجود نہ ہو، یا اس کے لیے کوئی قطعی اجماع نہ بھی ہو۔ اس لحاظ سے، قیاس (اسلامی تشبیہ) نئے احکام اور نئے ابھرنے والے معاملات اور مسائل کے حل کے لیے بہت زیادہ حصہ ڈالتا ہے جو ابھی تک نہیں اٹھائے گئے ہیں۔
مثال کے طور پر، قرآن جمعہ کی نماز کے وقت (خاص طور پر نماز کی آخری اذان کے بعد) سامان کی خرید و فروخت سے منع کرتا ہے۔ قیاس کے اعتبار سے یہ ممانعت ہر قسم کے لین دین تک عام اور وسیع ہے کیونکہ دونوں صورتوں میں ایک ہی الٰہ (نماز ترک کرنا) موجود ہے۔
اللغة العربية (قياس) لأحد المصادر الثانوية للشريعة والتي تنطوي على تشبيه القضية التي يوجد فيها حكم شرعي صريح قائم على النص بمسألة جديدة ليس لها نص قانوني صريح (ناس). ، وكلاهما يشتركان في نفس السبب أو النسبة الأساسية (أو كلمة “illah” باللغة العربية). ببساطة ، يستند القياس (القياس) إلى تطبيق الأمر الزجري من قضية على أخرى بشرط أن يكون لكل منهما نفس السبب الفعال. وهذا يعني امتداد قيمة الشريعة من الحالة الأصلية (asl) إلى حالة جديدة “مماثلة” (far’e). لا يلجأ الفقهاء إلى القياس إلا إذا لم يرد حكم في الدعوى الجديدة في القرآن أو السنة ، أو حتى إذا لم يكن هناك إجماع محدد. بهذا المعنى ، يساهم القياس (القياس الإسلامي) بشكل كبير في استنباط أحكام وحلول جديدة للأمور الناشئة حديثًا والمشكلات التي لم تُطرح بعد.
على سبيل المثال ، يحظر القرآن بيع وشراء البضائع في وقت صلاة الجمعة (تحديدًا بعد آخر آذان للصلاة). بالقياس ، هذا النهي معمم وممتد ليشمل جميع أنواع المعاملات لأن نفس العلة متاحة في كلتا الحالتين.

Recognition Criteria: When to Capitalise an Intangible Asset

IAS 38 establishes stringent recognition criteria that must be satisfied before an intangible asset can appear on the balance sheet. This rigorous framework prevents premature or inappropriate capitalisation whilst ensuring genuine assets receive proper accounting treatment.

The two fundamental conditions are probability and measurability. First, it must be probable that future economic benefits attributable to the asset will flow to the entity. Second, the cost of the asset must be reliably measurable. These criteria work together to ensure only substantive, quantifiable intangible assets are recognised.

Probable Future Benefits

Asset must be expected to generate economic value

Reliable Measurement

Cost must be determinable with precision

Identifiability Test

Asset separable or arising from rights

Never Capitalised

Internally generated goodwill and brands cannot be recognised as assets under IAS 38, as their costs cannot be distinguished from the cost of developing the business as a whole.

Conditional Capitalisation

Development costs may be capitalised when strict criteria are met, demonstrating technical feasibility and commercial viability, whilst research costs must be expensed immediately.

Research vs Development: Key Distinctions Under IAS 38

IAS 38 makes a critical distinction between research and development phases, with fundamentally different accounting treatments for each. This separation reflects the inherent uncertainty in early-stage activities versus the more predictable outcomes of later development work.

Research Phase

Original and planned investigation undertaken to gain new scientific or technical knowledge. All research expenditure must be recognised as an expense when incurred, as future benefits remain uncertain.

Development Phase

Application of research findings to design or produce new or substantially improved products, processes, or systems. Development costs may be capitalised when specific criteria demonstrate viability and intent.

Capitalisation Criteria

• Technical feasibility demonstrated
• Intention to complete and use/sell
• Ability to use or sell the asset

Additional Requirements

• Future economic benefits probable
• Adequate resources available
• Ability to measure expenditure reliably

Practical Example

A pharmaceutical company developing a new drug expenses research costs but capitalises development costs once clinical trials demonstrate efficacy and regulatory approval becomes probable.

Measuring Intangible Assets: Cost Model and Revaluation Model

IAS 38 provides two distinct measurement approaches following initial recognition, allowing entities flexibility whilst maintaining rigorous standards. The choice between models significantly impacts how intangible assets appear in financial statements and affects key financial metrics.

Initial Measurement at Cost

All intangible assets are initially measured at cost, which includes the purchase price plus any directly attributable expenditure necessary to prepare the asset for its intended use. This includes professional fees, testing costs, and employee costs directly arising from bringing the asset to working condition.

Subsequent Measurement Options

After recognition, entities choose their accounting policy from two permitted approaches, applying it consistently to entire classes of intangible assets. This choice reflects management’s view on the most relevant and reliable measurement basis.

Cost Model

The asset is carried at its cost less any accumulated amortisation and accumulated impairment losses. This provides a conservative, verifiable measurement basis.

• Most commonly used approach
• Simple and objective
• No requirement for active markets

Revaluation Model

The asset is carried at fair value at the revaluation date less any subsequent accumulated amortisation and impairment losses. Requires an active market to exist.

• Reflects current market values
• Rarely used due to limited active markets
• Requires regular revaluations

Practical reality: Fair value measurement under the revaluation model is extremely rare for intangible assets, as active markets seldom exist for items such as brands, mastheads, patents, or trademarks. The cost model therefore dominates in practice.

Amortisation and Impairment: Managing Asset Lifecycles

Once recognised, intangible assets require systematic accounting treatment throughout their useful lives. IAS 38 distinguishes between assets with finite and indefinite useful lives, prescribing different approaches to reflect their economic consumption and potential value deterioration.

Initial Recognition

Asset capitalised at cost and useful life determined

Finite Life: Amortise

Systematic allocation over useful economic life

Indefinite Life: Test

Annual impairment testing without amortisation

Impairment Loss

Recognised when recoverable amount falls below carrying amount

Finite Useful Lives

Intangible assets with finite useful lives are amortised systematically over their expected period of economic benefit. The amortisation method should reflect the pattern in which benefits are consumed—typically straight-line unless another pattern is more appropriate.

• Straight-line method most common
• Reviewed annually for changes
• Amortisation begins when available for use

Indefinite Useful Lives

Assets with indefinite useful lives are not amortised but instead tested for impairment annually and whenever indicators suggest potential value deterioration. An indefinite life doesn’t mean infinite—it means no foreseeable limit to benefit generation.

• No systematic amortisation
• Annual impairment testing required
• Useful life reassessed each period

Impairment Recognition

Impairment losses are recognised in profit or loss when the carrying amount exceeds the recoverable amount (the higher of fair value less costs of disposal and value in use). This ensures assets aren’t overstated.

• Tested when indicators present
• Loss recognised immediately
• May be reversed in future periods

Disclosure Requirements: Transparency in Financial Reporting

IAS 38 mandates comprehensive disclosures to provide users of financial statements with essential information about intangible assets and their impact on an entity’s financial position and performance. These disclosures enable stakeholders to assess the nature, carrying amounts, and changes in intangible assets during the reporting period.

Asset Classification

Entities must distinguish between internally generated and other intangible assets, showing each class separately with reconciliation of opening and closing balances.

Useful Lives & Rates

Disclosure of useful lives or amortisation rates applied, indicating whether lives are finite or indefinite and the factors supporting indefinite life assessments.

Amortisation Methods

The amortisation methods used for intangible assets with finite useful lives must be disclosed, along with justification for any method other than straight-line.

Carrying Amounts

Gross carrying amount, accumulated amortisation, and accumulated impairment losses at the beginning and end of the period for each class of intangible asset.

Movement Reconciliation

Detailed reconciliation showing additions, disposals, acquisitions through business combinations, amortisation, impairment losses, and other changes during the period.

Financial Impact

Line items in the statement of comprehensive income where amortisation and impairment losses are included, helping users understand profit impact.

“These comprehensive disclosures help users understand the significance of intangible assets to an entity’s financial position and performance, enabling informed investment and credit decisions.”

Recent Amendments and Related Standards Impacting IAS 38

IAS 38 continues to evolve in response to changing business models and accounting practices. Recent amendments and the broader IFRS framework significantly influence how intangible assets are accounted for in modern financial reporting.

The 2014 amendments provided important clarification on when revenue-based amortisation methods are appropriate for intangible assets. Generally, revenue-based methods are presumed to be inappropriate because revenue reflects factors beyond the consumption of economic benefits embodied in the asset, such as selling efforts and price changes.

The International Accounting Standards Board (IASB) continues researching potential updates to IAS 38, recognising that the digital economy and evolving business models may require enhanced guidance on emerging types of intangible assets, particularly digital assets and internally generated intangibles.

2014 Clarifications

Revenue-based amortisation guidance refined

IFRS Integration

Alignment with related standards

Ongoing Research

IASB exploring future enhancements

Related IFRS Standards Affecting IAS 38

IFRS 15: Revenue from Contracts with Customers

Impacts recognition of contract-related intangible assets and the timing of revenue recognition, which affects decisions about when development costs may be capitalised.

IFRS 16: Leases

Affects the treatment of software licences and other intangible assets acquired through leasing arrangements, clarifying when assets should be recognised under IAS 38 versus IFRS 16.

IFRS 17: Insurance Contracts

Influences how insurance-related intangible assets are recognised and measured, particularly regarding acquired insurance portfolios and related contractual rights.

IFRS 18: Presentation and Disclosure

Enhances requirements for presenting and disclosing intangible assets in financial statements, improving transparency and comparability for users.

Practical Implications: Applying IAS 38 in Today’s Business Environment

Successfully implementing IAS 38 requires careful judgement and robust internal processes. In today’s knowledge economy, where intangible assets often represent the majority of enterprise value, proper accounting treatment has significant implications for financial reporting, taxation, and stakeholder confidence.

Distinguish Research from Development

The most critical practical challenge is accurately identifying when research transitions to development. Companies must establish clear internal processes and documentation to support this distinction, as it directly impacts whether costs are expensed or capitalised.

Assess Technical Feasibility

Before capitalising development costs, organisations must rigorously evaluate technical feasibility and demonstrate the asset’s ability to generate probable future economic benefits. This requires detailed project documentation and regular reassessment.

Build Investor Confidence

Accurate intangible asset accounting enhances the reliability of financial statements, supporting investor confidence and facilitating access to capital markets. Transparent reporting demonstrates strong governance and financial management.

Real-World Example: Software Development

Consider a technology company developing a new software platform. During the initial research phase—exploring potential architectures, conducting feasibility studies, and investigating various technical approaches—all costs must be expensed immediately as incurred.

Once the project moves into development, with detailed specifications established and technical feasibility demonstrated, the company may begin capitalising costs. This includes programmer salaries, directly attributable overheads, and costs of materials consumed. However, this capitalisation only begins when all six IAS 38 criteria are satisfied.

The research phase costs expensed might include £200,000 for exploratory work, whilst subsequent capitalised development costs could reach £800,000 before the software becomes available for use.

Total Project Investment

Combined research and development expenditure

Research Costs Expensed

Immediately recognised in profit or loss

Development Costs Capitalised

Recognised as intangible asset on balance sheet

Key takeaway: Compliance with IAS 38 requires ongoing training, robust internal controls, and clear communication between technical teams and finance departments. The standard’s principles-based approach demands professional judgement supported by comprehensive documentation, particularly for internally generated intangible assets.