Intangible assets are defined in FRS10 as ‘non financial fixed assets that do not have physical substance but are identifiable and are controlled by the entity through custody or legal rights’.
Internally developed intangible assets may be capitalised only
when they have a readily ascertainable market value. To meet this
test, FRS10 requires that the asset should belong to a homogenous
population of assets that are equivalent in all material respects,
and that an active market, evidenced by frequent transactions, for
such assets exists. Therefore it is clear that assets such as
patents, brands, publishing titles and patented drugs should not be
capitalised in the hands of the developer, as they will be unique.
Once sold, however, a purchaser must capitalise them.
The general rule for an intangible asset purchased separately
from the purchase of a business is that it should be capitalised at
its cost. If it is purchased as part of the purchase of a business
then FRS7 will apply to set the value shown.
For acquired intangible fixed assets, these should be
capitalised on acquisition in accordance with the rules in FRS7 (
CIRD30520).
Where an intangible asset is acquired as part of the purchase of a business it should only be capitalised separately from goodwill if its value can be measured reliably on initial recognition. Otherwise it should be included as part of the goodwill.
