This standard is established based on the Basic Standard for Enterprise Accounting and specifies the recognition, measurement, and disclosure of intangible assets.
I. Definition and Recognition of Intangible Assets
Definition
Intangible assets are identifiable non-monetary assets without physical substance that are owned or controlled by an enterprise.
An asset meets the identifiability criteria if it satisfies any of the following conditions:
- • Can be separated or divided from the entity and sold, transferred, licensed, leased, or exchanged either individually or together with a related contract, identifiable asset, or liability.
- • Arises from contractual rights or other statutory rights
Confirm Conditions
- (1) It is probable that the economic benefits associated with the intangible asset will flow to the enterprise.
- (2) The cost of the intangible asset can be measured reliably.
II. Treatment of Research and Development Expenditures
Expenditures on internal research and development projects shall be classified into research phase expenditures and development phase expenditures.
Research Phase
Original, planned investigation to acquire and understand new scientific or technical knowledge.
Expenses shall be recognized in current period profit or loss when incurred.
Development Phase
Apply research findings or other knowledge to a plan or design prior to commercial production or use.
Items meeting all 5 criteria are recognized as intangible assets.
5 criteria for recognizing an asset as intangible during the development phase:
- It is technically feasible to complete the intangible asset so that it can be used or sold.
- Intention to complete the intangible asset and use or sell it.
- It can be demonstrated how intangible assets generate economic benefits.
- Sufficient technical, financial, and other resources are available to support.
- Expenditures incurred during the development phase of the intangible asset can be reliably measured.
III. Initial Measurement
Intangible assets shall be initially measured at cost.
Purchased Intangible Assets
Cost includes the purchase price, related taxes, and other expenditures directly attributable to bringing the asset to its intended use.
Internally developed intangible assets
Cost includes total expenditures incurred from the date self-satisfaction of recognition criteria is achieved until the asset is ready for its intended use. However, expenditures previously expensed in prior periods are not adjusted.
4. Subsequent Measurement
Limited lifespan
The amount to be amortized shall be systematically and rationally amortized over its useful life. The amortization method shall reflect the expected pattern of economic benefits; if such pattern cannot be reliably determined, the straight-line method shall be used.
Indefinite useful life
Should not be amortized. However, its useful life must be reviewed at each reporting period. If evidence indicates a finite useful life, estimate it and account for it accordingly.
Impairment of intangible assets shall be handled in accordance with Accounting Standards for Business Enterprises No. 8 — Impairment of Assets.
5. Disposal and Disclosure
When an enterprise disposes of an intangible asset, the difference between the proceeds received and the asset's carrying amount shall be recognized in profit or loss for the current period. If an intangible asset is no longer expected to generate economic benefits for the enterprise, its carrying amount shall be written off.
Disclosure Requirements
- • Beginning and ending balances, accumulated amortization, and cumulative impairment losses of intangible assets
- • Estimated useful lives of intangible assets with finite useful lives
- • Intangible assets with indefinite useful lives: Criteria for determining that the useful life is indefinite
- • Amortization method for intangible assets
- • Book value and current amortization of intangible assets pledged as collateral
- Amount of research and development expenditures recognized in current profit or loss and as intangible assets
Regulatory Document Attachment
Accounting Standards for Business Enterprises No. 6 — Intangible Assets (PDF)