Intangible asset
An intangible asset is a non-physical resource controlled by a business, expected to generate future economic benefits, such as a patent, brand or software licence; it is carried at cost and amortised if its useful life is finite.
What it is
See it move
A patent with a five-year life is amortised systematically each period, spreading its cost like depreciation. A brand name with no foreseeable end is not amortised at all; instead it is tested for impairment at least annually. Only purchased intangibles are recognised — internally generated brands and customer lists are expensed as incurred.
If you trained under a national GAAP
DE · HGBWhere national-GAAP intuition diverges from the international standard
HGB (German)
HGB draws a sharp line between the research phase and the development phase of an internally generated intangible. Spending in the research phase must always be expensed as it is incurred, because its future benefit is too uncertain to recognise. For development-phase costs the Commercial Code grants an option rather than an obligation: a company may capitalise the development outlay for a self-created intangible, but it is equally free to expense it. Where the option to capitalise is taken, the corresponding amount is protected by a distribution restriction, so those unrealised, self-generated values cannot be paid out as dividends.
IFRS
IAS 38 also bars the capitalisation of research, but it removes the choice on the development side. Once IAS 38's development-recognition test is satisfied — broadly, the project is workable, the firm means to finish it and use or sell the result, it can fund the work, benefits are likely, and the spending can be reliably measured — capitalisation becomes mandatory rather than optional. An IFRS reporter cannot elect to expense qualifying development costs, so comparable firms can show materially different intangible balances depending only on which framework they apply.
Edlintics’ own explanatory summary — not official IFRS Foundation or national standard-setter guidance.
Check yourself
A company acquires a patent for €60,000. The patent has a legal life of ten years, after which competitors may use the design freely. Under accrual accounting, what is the correct treatment over the patent's life?