Intangible Asset – Trademarks
Trademarks acquired have finite useful lives and are carried at cost less any accumulated amortisation and any accumulated impairment losses.
Amortisation is calculated using the straight-line method to allocate the cost of trademarks over their estimated useful lives of 7 years. Cost of renewing trademarks is recognised in the income statements as incurred.
Review Of Useful Life Of Intangible Assets
FRS 138: Intangible Assets requires that the useful life of an intangible asset with an indefinite useful life to be reviewed annually to determine whether the useful life assessment continues to be supportable. An assessment has been carried out and the directors, having considered the useful life of the intangible assets, concluded that that they are unable to determine the foreseeable limit to the period over which these assets are expected to generate net cash inflows to the Group.
Research and Development Expenditure
Research expenditure is recognised as an expense when it is incurred. Development expenditure is recognised as an expense except that expenditure incurred on development projects are capitalised as long-term assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure is capitalised if, and only if an entity can demonstrate all of the following:-
its ability to measure reliably the expenditure attributable to the asset under development;
the product or process is technically and commercially feasible;
its future economic benefits are probable;
its ability to use or sell the developed asset;
the availability of adequate technical, financial and other resources to complete the asset under development; and
its intention to complete the intangible asset and use or sell.
Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if any. Development expenditure initially recognised as an expense is not recognised as assets in the subsequent period. The development expenditure is amortised on a straight-line method over a period of not exceeding 5 years when the products are ready for sale or use. In the event that the expected future economic benefits are no longer probable of being recovered, the development expenditure is written down to its recoverable amount.
Industrial Operating Right
Industrial operating right represent costs incurred by the Company to obtain the certifications for developed capabilities to design, construct and develop component for low-voltage switchboards to meet international standards. As such certificate obtained do not have any expiry date, the Company does not amortise costs incurred, instead impairment is tested annually or more frequently if events or changes in circumstances indicate that the industrial operating right might be impaired.
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use of the specific software. These costs are amortised over their estimated useful lives. Costs associated with developing or maintaining computer software programmes are recognised as an expense when incurred. Cost that are directly associated with identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include employee costs incurred as a result of developing software and an appropriate portion of relevant of overheads. Costs which enhances or extends the performance of computer software programme beyond their original specifications is recognised as a capital improvement and added to the original cost of software. Computer software development costs recognised as assets are amortised using straight line method over their estimated useful lives, not exceeding a period of 10 years.
i. Brand name
The Company’s brand name is stated at cost less any impairment loss. The useful life of the Company’s brand name is estimated to be indefinite because based on the Company’s current product market share, the directors are of the opinion that there is no foreseeable limit to the period over which the brand name is expected to generate net cash flows to the Company. They are not amortised but tested for impairment annually or more frequently when indicators of impairment are identified.
ii. Computer software
Acquired computer software licences are capitalised on the basis of the cost incurred to acquire and bring to use the specific software. These costs are amortised on a straight line basis over their expected useful lives.
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
ii. Product development expenditure
All research costs are recognised in the profit or loss as incurred.
Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure during the development. Product development expenditures which do not meet these criteria are expensed when incurred.
Development costs, considered to have finite useful lives, are stated at cost less any impairment losses and are amortised using the straight-line basis over the commercial lives of the underlying products not exceeding 3 years. Impairment is assessed whenever there is an indication of impairment and the amortisation period and method are also reviewed at least at each balance sheet date.