ACCA Strategic Business Reporting (SBR) Practice Exam

Which of the following is an example of an intangible asset as defined by IAS 38?

1. Land and buildings

2. Patents and software

3. Inventory and cash

4. Accounts receivable

The correct answer is: Patents and software

An intangible asset, as defined by IAS 38, is a non-monetary asset that lacks physical substance but is identifiable and controlled by an entity. These assets provide future economic benefits and can be either acquired externally or developed internally. Patents and software fit perfectly into this category. Patents, granting legal rights to inventions for a defined period, clearly demonstrate the characteristics of an intangible asset, as they provide exclusive rights that can lead to future earnings. Similarly, software, particularly when purchased or developed for internal use, is also considered an intangible asset because it does not have a physical form, yet it can contribute significantly to a company’s operations and revenue generation. In contrast, land and buildings are tangible assets, meaning they have physical substance. Inventory and cash are classified as current assets, and accounts receivable represent amounts owed to the business and thus do not meet the criteria for intangible assets. Therefore, patents and software are the best examples of intangible assets as defined by IAS 38.