1. TANGIBLE ASSETS
Under MPERS, tangible assets are referred to as Property, Plant, and Equipment (PP&E). These are physical, long-term assets used in a company's operations, not for immediate sale.
- Recognition and Measurement: A tangible asset is recognized when it's probable that future economic benefits will flow to the entity and its cost can be measured reliably. It is initially measured at cost, which includes the purchase price, directly attributable costs, and an estimate for dismantling and site restoration.
-
Measurement After Initial Recognition: After the initial recognition, MPERS allows for a choice between two models for a class of assets:
- Cost Model: The asset is carried at its cost less any accumulated depreciation and impairment losses.
- Revaluation Model: The asset is carried at its fair value at the date of revaluation, less subsequent accumulated depreciation and impairment losses.
- Depreciation: The asset's cost is depreciated over its useful life, except for land. The depreciation method should reflect how the entity expects to consume the asset's economic benefits.
EXAMPLES OF ASSETS
- Land and Buildings: The physical location of a business, including office buildings, factories, warehouses, and the land they are built on.
- Furniture and Fittings: Physical assets such as desks, chairs, shelves, and cabinets used to furnish an office or commercial space.
- Office Equipment: This includes items like printers, scanners, and telephones that are used for daily business operations.
2. INTANGIBLE ASSETS
Intangible assets are non-monetary assets without physical substance, such as patents, copyrights, and software.- Recognition: An intangible asset must be identifiable, controllable by the entity, and expected to generate future economic benefits. Internally generated intangible assets (like a brand) are generally not recognized.
- Measurement: MPERS requires that all intangible assets (other than goodwill) must be measured using the cost model only. Unlike tangible assets, the revaluation model is not permitted for intangible assets.
- Amortization: All intangible assets under MPERS are considered to have a finite useful life and must be amortized. The useful life of an intangible asset, including goodwill, is capped at a maximum of 10 years if it cannot be reliably estimated. This differs from other standards that may allow for indefinite useful life for certain intangible assets.
- Goodwill: Under MPERS, goodwill is amortized over its useful life. If the useful life cannot be reliably estimated, it must be amortized over a maximum of 10 years.
EXAMPLES OF ASSETS
- Patents: Legal rights granted to an inventor that provide exclusive rights to an invention for a set period, preventing others from making or selling it.
- Trademarks: A legally protected symbol, logo, or name that identifies a company's products or services and distinguishes them from competitors.
- Copyrights: A legal right that gives the creator of original works (e.g., books, music, or software) exclusive rights to its use and distribution.
- Goodwill: The value of a company's reputation and brand name, often recognized during the acquisition of another business
3. Key Differences Between MPERS and Other Frameworks
MPERS is a simplified version of the Malaysian Financial Reporting Standards (MFRS), based on the International Financial Reporting Standards for Small and Medium-sized Entities (IFRS for SMEs). A key difference is in the accounting for intangible assets. MPERS requires all intangible assets to be amortized, whereas MFRS allows for some intangible assets to have an indefinite useful life and not be amortized. Additionally, MPERS requires all borrowing costs to be expensed, unlike MFRS which may allow for capitalization of borrowing costs.
KEY DIFFERENCES
| Feature | Intangible Assets | Tangible Assets (PP&E) |
|
Definition |
Non-physical resources that lack a physical form but still hold significant value, often derived from legal rights or a competitive advantage. | Physical, long-term assets that a business owns, can touch, and are used to generate income |
| Physical Substance | No | Yes |
| Main MPERS Section | Section 18 | Section 17 |
| Measurement After Initial Recognition | Only the Cost Model is allowed. | Both the Cost Model and the Revaluation Model are allowed. |
| Useful Life | All intangible assets are considered to have a finite useful life. | May have a finite or infinite useful life (e.g., land). |
| Expense Allocation | Amortization is used. | Depreciation is used |
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