28 April 2011
Internally generated intangible assets
If views are quite unanimous that the accounting treatment for purchased intangible assets should be similar to that for tangible assets, many commentators on the Exposure Drafts were opposed to the concept that an enterprise should recognize a self-constructed intangible asset when the recognition criteria were met. These opponents include:
users of financial statements. They are usually suspicious of the types of internally generated intangible assets that are recognized in the balance sheet. They also believe that it is not possible to assess reliably the amount that can be recovered from intangible assets, unless its value can be determined by reference to an active market. Therefore, they believe that recognizing a self-constructed intangible asset for which no active market exists at an amount other than zero may mislead investors; those who have concerns that IAS 38 s definition of, and recognition criteria for, an intangible asset - which require management and auditors to exercise judgement - are too subjective and will undermine the comparability of financial statements; and those who believe that IAS 38 s requirements will result in very little decision-useful or predictive information when applied to internally generated intangible assets. This is because they believe that, in most cases, the cost of a self-constructed intangible asset recognized in the balance sheet will not represent the total expenditure on that asset: demonstration of technological feasibility or commercial success (required to meet the recognition criteria) will generally not be achieved until substantial expenditure has been recognized as an expense. Therefore, they believe that it is not worth recognizing only part of the cost of an internally generated intangible asset.
Querist :
Anonymous
Querist :
Anonymous
(Querist)
28 April 2011
Hi, If u dont mind,kindly explian me why Internally generated goodwill is not accounted in the books of accounts,as per indian accouting standards? My doubt is when we are incurring some expenditure in the form of advertisment and some other expenditure to earn goodwill for the enterprise in such case why we are not allowing us to recognize such internally generated goodwill in the books of accounts?
CAclubindia
