Ad-Free CAclubindia and daily updates on your mobile. Subscribe Now!

Capitalisation of trademark cost

Hiten Tita (CA) (57 Points)

21 August 2015

What should be treatment of amount paid for trademark registration renewal to Authority? Should it be capitalised and written off over a period of renewal term? Also What should be treatment of consultancy charge paid to advocate for renewal related service? Should this be capitalised or charged to revenue?. Pls reply.

Reply
Follow
Share

1 Replies

Shishir Nayak ((Expert)) (369 Points)
Replied 21 August 2015

Subsequent expenditure on an intangible asset after its purchase or its completion should be recognised as an expense when it is incurred unless:

(a) it is probable that the expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance; and

(b) the expenditure can be measured and attributed to the asset reliably. If these conditions are met, the subsequent expenditure should be added to the cost of the intangible asset.

Subsequent expenditure on a recognised intangible asset is recognised as an expense if this expenditure is required to maintain the asset at its originally assessed standard of performance. The nature of intangible assets is such that, in many cases, it is not possible to determine whether subsequent expenditure is likely to enhance or maintain the economic benefits that will flow to the enterprise from those assets. In addition, it is often difficult to attribute such expenditure directly to a particular intangible asset rather than the business as a whole. Therefore, only rarely will expenditure incurred after the initial recognition of a purchased intangible asset or after completion of an internally generated intangible asset result in additions to the cost of the intangible.