Intangible assets and amortisation

An intangible asset is an identifiable non-monetary asset without physical substance (IAS 38.8) — software, licences, patents, customer lists, franchises. Three features must be present: - Identifiable: separable (it could be sold or licensed on its own) or arising from contractual or legal rights. - Control: the entity can obtain the benefits and restrict others' access — usually through legal rights. Staff skills and customer loyalty generally fail this test. - Future economic benefits: revenue or cost savings.

It's recognised only if those benefits are probable and the cost can be measured reliably (IAS 38.21).

Purchased intangibles are measured at cost: purchase price plus directly attributable costs of preparing the asset for use (legal fees, professional fees for getting it working). Advertising the new product and administration are excluded.

Internally generated intangibles are split into two phases: - Research (original investigation for new knowledge) — always expensed (IAS 38.54). - Development (applying knowledge to design a new product or process) — capitalised from the date the entity can demonstrate all six criteria in IAS 38.57: technical feasibility; intention to complete; ability to use or sell; how it will generate probable benefits; adequate resources to finish; and reliable measurement of the costs. Costs expensed before that date are never reinstated. - Internally generated brands, mastheads, publishing titles and customer lists are never recognised (IAS 38.63), nor is internally generated goodwill.

Amortisation. An intangible with a finite useful life is amortised on a systematic basis over that life, starting when it is available for use. Residual value is normally zero. The method reflects the pattern of benefits; straight-line is used if the pattern can't be determined reliably, and revenue-based methods are presumed inappropriate (IAS 38.98A). An intangible with an indefinite useful life — no foreseeable limit to the period it generates cash, such as a broadcasting licence renewable at little cost — is not amortised but tested for impairment every year and its life reviewed annually.

Subsequent measurement is usually the cost model. The revaluation model is allowed only where an active market exists, which is rare for intangibles.

US GAAP: research and development costs are generally expensed (ASC 730), with exceptions for internal-use software after the preliminary project stage (ASC 350-40) and software to be sold once technological feasibility is reached (ASC 985-20). ASU 2025-06 (issued September 2025) replaces the internal-use software project stages with a probable-to-complete threshold for annual periods beginning after 15 December 2027, with early adoption permitted. Revaluation isn't permitted.