How to Label: Accounting

 Intangible asset in the context of accounting is defined as: an identifiable nonmonetary asset without physical substance (IAS 38.8), computer software, patents, copyrights, customer lists, licenses, trademarks and goodwill are all considered as intangible assets.  Based on the definition of IAS, there are three critical attributes of an intangible assets: 

1. Identifiability
2. Control (power to obtain benefits from the asset)
3. Future economic benefits (such as revenues or reduced future costs)

Intangible assets include but not limited to computer software, patents, copyrights, customer lists, licenses, trademarks and goodwill. 

Goodwill: goodwill is the excess of the cost of the acquistion over the fair value of the acquiring assets and liabilities. Goodwill is recognized as an asset in the balance sheet and should be listed with a seperate line.  Differ from other types of intellectual property, goodwill can be easily identified in the financial statements. Under IFRS and U.S. GAAP, goodwill should be capitalized and test for impairment annually.  

Patents:  provide exclusive rights to produce or sell new inventions. When a company invents a new product and receives a patent for it, the cost of the patent is the purchase price. In the income statement, the cost of patent will record as expense.

R&D Cost:  this cost is recorded as operating expense when they are incurred.

Copyrights:  provide the owner with the exclusive right to reproduce and sell artistic works such as books, songs, or movies. If a copyright is purchased, the purchase price determines the amortizable cost.

Trade names and Trademarks:  are usually not listed on the financial statement. However, all expenditure for protecting and defending the trademark and trade names are amortizable.