INTANGIBLE ASSETS (DISCUSSION)

- Non-tangible / it doesn’t or can’t be perceived by physical touch

- A non-current asset – which means it is more than 1 year of usage
- Control
- Future economic benefit

REQUISITES OF AN INTANGIBLE ASSETS

1. IDENTIFIABLE
- proper of segregation/identification of what kind of an intangible
-Designation what is it
2. CONTROL
- concept of confidentiality and in hands to govern the asset. Only the company knows how to create
such asset or use the intangible asset
3. EXPECTED FUTURE ECONOMIC BENEFITS
- There will be an out comes and produce earnings to the company

*An Intangible is AMORTIZED OVER THE LEGAL/USEFUL LIFE” – this is the depreciation concept in
tangible non-current assets where there is decrease in valuation due to passage of time or usage

TYPES OF INTANGIBLES
1. PATENT
- legal protection over the invented or newly created technology
- it has a normal life of 20 years from the date FILING of the application (not the time you’ve created
the asset)
2. COPYRIGHT
- A legal protection for literary, musical, or artistic work
-example. Author of the book, the who compose the one who performed.
- it is a legal protection for illegal or unpaid distribution or use of asset. Example. Recto in manila for
books. The sold copies that does not obtain permission from the author and the benefit comes to the
seller solely.
- The protection is during the life of the author plus 50 years after the author’s death
3. FRANCHISE
- it is contract based agreement
Either
3.1 between the government and a private entity or individual (example: ABS CBN)
3.2 between private entities or individuals (example: 7/11)
-Subject for amortization if the franchise have a definite period, but if it is indefinite period it isnot
amortized but tested for impairment
4. TRADEMARK/ TRADE NAME (BRAND NAME)
-Trade mark and tradename are usually interchanged but it is same in some concept but in the literal
explanation. The Trademark is usually the LOGO or picture and the trade name is the words that
describe the mark. Sometimes the trademark and tradename are the same of the company name but not
always. Some are shortened just like Jollibee but the company name is Jollibee Foods Corporation
Tradename: Mcdonalds
Company Name: McDonald's Corporation
- it has a life of 10 years and may be renewed for another 10 years meaning, trademark/ tradename can
consider to have an “Indefinite useful life”
- an indefinite useful life is not amortized anymore but subject to impairment

Research and Development Cost

Research costs
- An expense
- It can’t be treated as part of capitalization because it still on research phase. And under research it doesn’t
guarantee if it will work and can bring future economic benefits

DEVELOPMENT COSTS
- treated as an intangible asset if ALL the criteria below is met. If one fails it is treated as outright expense
1. Feasibility of completion
2. intention to use or sell it
3. ability to operate the asset
4. how does the asset can create economic benefit
5. measure reliably of the cost incurred during the development
Examples in the bookof the cost to be recorded as an expense when the development doesn’t met the criteria
1. start up cost
2. training cost
3. Advertising cost
4. business relocation costs
INITIAL MEASUREMENT
- Cost
SUBSEQUENT MEASUREMENT
1. Cost model
Or
2. Revaluation Model

If the selling price of the business is at 1,400,000

DR Asset 2,000,000
DR Goodwill 200,000
CR Liability 800,000
CR Cash 1,400,000

If the selling price of the business is at 1,000,000

DR Asset 2,000,000
CR Gain on Bargain Purchase 200,000
CR Liability 800,000
CR Cash 1,000,000

Law: Intellectual Property Code - RA 8293