In accordance with AASB 138/IAS 38 Intangible Assets, company formation costs such as professional legal and accounting advice qualifies for recognition as an asset.

Question

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According to AASB 138/IAS 38 Intangible Assets, company formation costs do not qualify for recognition as an asset because they do not meet the criteria of an identifiable non-monetary asset without physical substance that is controlled by the entity and from which future economic benefits are expected to flow to the entity. These costs are considered to be expenses that should be recognized in profit or loss when incurred.

In Accordance with AASB 138/IAS 38 Intangible Assets, Company Formation