Chapter 32: Identifiable Intangible Assets
If internally developed, cost:
PATENT
- exclusive right granted by the
government to an inventor enabling the
grantee to control the manufacture,
sale, or other use of the invention for a
specified period of time
A. If acquired by purchase, cost:
 Purchase price
 Import duties
 Nonrefundable purchase taxes
 Any directly attributable cost
B. If internally developed, cost:
 Licensing
 Other related legal fees in
securing the patent rights
C. From the time of technological feasibility:
 Any additional development cost
to develop the patent to full
manufacturing stage may be
capitalized as Patent cost or
separately accounted for as
development cost (capitalizable &
amortized over the useful life of
the patent)
D. Expensed:
o Research and development cost
o Litigation costs
- Successful: Expense
- Unsuccessful: Loss
TRADEMARK
- A symbol, sign, slogan or name used to
mark a product to distinguish it from
other products
A. If purchased, cost:
 Purchase price
 Directly attributable costs
B.
 Expenditures required to
establish it (filing fees, registry
fees)
 Other expenses incurred in
securing the trademark (design
cost of the trademark)
C. Expensed:
o Litigation cost (successful)
COPYRIGHT
- an exclusive right granted by the
government to the author, composer,
or artist enabling the grantee to
publish, sell, or otherwise benefit from
the literary, musical, or artistic work
- the term of protection for copyright is
during the life of the author and for 50
years after his death (Intellectual
Property Code of the Philippines)
A. Cost:
 All expenditures incurred in the
production of the work
including those required to
establish or obtain the right
B. If purchased, cost:
 Cash
 Directly attributable cost
FRANCHISE
- Under a purchase agreement, one party
called the franchisor grants certain
rights to another party called the
franchisee
Franchise agreement may be:
 Between the government and a private
entity/individual
 - 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
amortized over 20 years (legal
life) or useful life, whichever is
shorter
 If patent is acquired from an original
patentee
- the cost shall be amortized over
the remaining legal life or useful
life, whichever is shorter
 Competitive Patent
(purpose is to protect)
- The cost shall be amortized over
the remaining life of the old
patent
 Related Patent
(purpose is to extend)
- the cost of the related patent
and any unamortized cost of the
old patent shall be amortized
over the extended life
 Related Patent (with no extension of
life) :
- New patent : amortized over
its own life
- Old patent : amortized over
the remainder of its life
Trademark
- The legal life of trademark is 10
years and may be renewed for
periods of ten years each
(RA 8293)
 Considering the almost automatic
renewal of a trademark, an entity
may properly classify trademark
as an intangible asset with an
indefinite life; hence, not
amortized
Copyright
 Cost of the copyright shall be
amortized over the useful life*
*useful life – period in which
benefits, sales, and royalties are
expected
- It is usually advisable to write-off the
cost of the copyright against the
revenue of the first printing (owing to
the difficulty in estimating the number
of years in which benefits will be
received)
Franchise
 Granted for a definite period
- Useful life or definite period,
whichever is shorter
 Granted indefinitely or perpetually
- Not amortized
Leasehold improvements (Depreciation)
 Cost shall be depreciated over
the leased term or life of the
improvements, whichever is
shorter
 Residual value – ignored
RENEWAL OPTION
 If uncertain: ignored in
determining the lease term
 If highly probable or certain: the
extension is considered in
determining the extended lease
term
Broadcasting License
 With indefinite life
- Not amortized
 With definite life
(cannot be renewed anymore)
- Amortized over the remaining
useful life
Airline Right
 Regarded as having indefinite
useful life; hence not amortized
Customer List
- A customer database containing
the name, contact information,
 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

----------------------------------------------------------------
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