The following are the ACCOUNTING POLICIES for Intangible assets of Commonwealth Bank of Australia extracted from its annual report of : Intangible assets are identifiable nonmonetary assets without physical substance. They are recognised only if it is probable the asset will generate future benefits for the Group. Those assets with an indefinite useful life are tested for impairment annually. All intangible assets must be tested for impairment when there is an indication that its carrying amount may be greater than its recoverable amount.

Goodwill

Goodwill arises on the acquisition of a business and represents the excess of the consideration paid over the fair value of the net assets and liabilities acquired. Goodwill is tested for impairment annually through allocation to a group of Cash Generating Units CGUs The CGUs recoverable amount is then compared to the carrying amount of the CGUs including goodwill and an impairment is recognised for any excess carrying value.

Computer software costs

Certain internal and external costs directly incurred in acquiring and developing software are capitalised and amortised over the estimated useful life on a straightline basis. The majority of software projects are amortised over three to five years. Software maintenance is expensed as incurred. SaaS arrangements are service contracts providing the Group with the right to access the providers application software over the contract period. Costs incurred to configure or customise, and the ongoing fees to obtain access to the provider\'s application software, are generally recognised as operating expenses when the services are received. Some of these costs incurred are for the development of software code that enhances, modifies or creates additional capability to existing onpremise systems and meets the recognition criteria for an intangible asset. These costs are recognised as intangible software assets and amortised over the useful life of the software on a straightline basis.

Brand names

Brand names include the Bankwest brand name acquired in a business combination and initially recognised at fair value. The Bankwest brand name has an indefinite useful life as there is no foreseeable limit to the period over which it is expected to generate cash flows.

Other intangibles

Other intangibles predominantly comprise customer relationships and software licences. Customer relationships acquired as part of a business combination are initially measured at fair value. They are subsequently measured at cost less accumulated amortisation and any impairment losses. Amortisation is calculated based on the timing of projected cash flows associated with those relationships.

Required: You are required to briefly explain how each of these intangible assets are recognised in the balance sheet and income statement where necessary as per the accounting policies and standards of intangible assets.

Answer rating: 100% (QA)

According to the accounting policies of Commonwealth Bank of Australia for intangible assets here is a brief explanation of how each of the four intan... View the full answer