Chapter 32: Identifiable Intangible Assets B.
If internally developed, cost:
Expenditures required to
PATENT establish it (filing fees, registry
- exclusive right granted by the fees)
government to an inventor enabling the Other expenses incurred in
grantee to control the manufacture, securing the trademark (design
sale, or other use of the invention for a cost of the trademark)
specified period of time
C. Expensed:
A. If acquired by purchase, cost: o Litigation cost (successful)
Purchase price
Import duties COPYRIGHT
Nonrefundable purchase taxes - an exclusive right granted by the
Any directly attributable cost government to the author, composer,
or artist enabling the grantee to
B. If internally developed, cost: publish, sell, or otherwise benefit from
Licensing the literary, musical, or artistic work
Other related legal fees in - the term of protection for copyright is
securing the patent rights during the life of the author and for 50
years after his death (Intellectual
C. From the time of technological feasibility: Property Code of the Philippines)
Any additional development cost
to develop the patent to full A. Cost:
manufacturing stage may be All expenditures incurred in the
capitalized as Patent cost or production of the work
separately accounted for as including those required to
development cost (capitalizable & establish or obtain the right
amortized over the useful life of
the patent) B. If purchased, cost:
Cash
D. Expensed: Directly attributable cost
o Research and development cost
o Litigation costs
- Successful: Expense FRANCHISE
- Unsuccessful: Loss - Under a purchase agreement, one party
called the franchisor grants certain
TRADEMARK rights to another party called the
- A symbol, sign, slogan or name used to franchisee
mark a product to distinguish it from
other products Franchise agreement may be:
Between the government and a private
A. If purchased, cost: entity/individual
Purchase price
Directly attributable costs
- the entity is permitted to use - Not included in the cost of Right of Use
public property in performing its asset, but accounted for separately
services under PPE
Between private entities/individuals
- The franchisee acquires the right Examples:
to use the trademark, patent, and On Leased Land: building, pavement,
process of franchisor (granted landscaping, driveway
either for a definite or indefinite On Leased Building : lighting
period) installations, repairs, partitions,
cabinets, shelves, ventilating system
A. Cost:
Lump sum payment (initial ORGANIZATION COSTS
franchise fee) (not an Intangible Asset)
Directly attributable costs (legal A. Includes:
fess and expenses incurred in Legal fees in connection with
connection with the acquisition the incorporation (drafting of
right) articles of incorporation and by-
laws and corporate registration)
B. Installment Basis Incorporation fees
If interest bearing note: Face Stock issuance cost*
Value of the Note plus Down (underwriting, accounting and
payment legal fees, printing costs and
If noninterest bearing note: tzex)
Present Value of the Note plus - presented as contra equity
Down payment (deduction from share
premium first, then from
C. Expense: Retained Earnings)
o Periodic franchise fee *an exception to organization costs
(Franchise Fee Expense) being expensed
LEASEHOLD OR LEASE RIGHT B. Expense:
- Accounting for lease is now governed Start-up costs (legal and
by IFRS 16 Leases secretariat costs)
- A lessee is required to initially recognize
a *Right of Use asset for the lease term WEBSITE DEVELOPMENT COST
(not an intangible asset)
and a Lease Liability for the obligation
- A website that has been developed for
to make lease payments
* an account title presented as a the purpose of promoting and
separate line item in the SFP advertising an entity’s products and
services
LEASEHOLD IMPROVEMENTS - Expense as incurred
(not an Intangible Asset)
- Are alterations or modifications on the AMORTIZATION OF INTANGIBLE ASSETS
leased property made by the lessee Patent
If internally developed
- the original cost shall be - It is usually advisable to write-off the
amortized over 20 years (legal cost of the copyright against the
life) or useful life, whichever is revenue of the first printing (owing to
shorter the difficulty in estimating the number
If patent is acquired from an original of years in which benefits will be
patentee received)
- the cost shall be amortized over
the remaining legal life or useful Franchise
life, whichever is shorter Granted for a definite period
Competitive Patent - Useful life or definite period,
(purpose is to protect) whichever is shorter
- The cost shall be amortized over Granted indefinitely or perpetually
the remaining life of the old - Not amortized
patent
Related Patent Leasehold improvements (Depreciation)
(purpose is to extend) Cost shall be depreciated over
- the cost of the related patent the leased term or life of the
and any unamortized cost of the improvements, whichever is
old patent shall be amortized shorter
over the extended life Residual value – ignored
Related Patent (with no extension of
life) : RENEWAL OPTION
- New patent : amortized over If uncertain: ignored in
its own life determining the lease term
- Old patent : amortized over If highly probable or certain: the
the remainder of its life extension is considered in
determining the extended lease
Trademark term
- The legal life of trademark is 10
years and may be renewed for Broadcasting License
periods of ten years each With indefinite life
(RA 8293) - Not amortized
Considering the almost automatic With definite life
renewal of a trademark, an entity (cannot be renewed anymore)
may properly classify trademark - Amortized over the remaining
as an intangible asset with an useful life
indefinite life; hence, not
amortized Airline Right
Regarded as having indefinite
Copyright useful life; hence not amortized
Cost of the copyright shall be
amortized over the useful life* Customer List
*useful life – period in which - A customer database containing
benefits, sales, and royalties are the name, contact information,
expected
order history and other vital and
social statistics (birth, death,
sickness)
Internally generated
- Not considered intangible
asset
Acquired
- Amortized over its useful life
IMPAIRMENT
These intangible assets are tested for
impairment at least annually (regardless
of whether it has definite or indefinite
life)
Trademark:
Annual cash flows
VIU =
Discount rate
US GAAP CLASSIFICATION OF INTANGIBLE
ASSET
Intangible Asset US GAAP Classification
Patent Technology-based
Trademark Market-related
Copyright Artistic-related
Franchise Contract-based
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Notes
The terms “trademark”, “trade name”,
and “brand name” are interchangeably
used
Start up costs includes: organization
costs, pre-operating costs, and pre-
opening
“new patent is received for an improved
version of the same drug” – related
patent
