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Since 1 January 2005, Australian companies or entities must adopt the new accounting rules based on international financial reporting standards for the valuation of intangible assets including patents, trademarks, designs, copyrights and licences.
Intangible assets are recognised only if it is probable that future economic benefits will be derived from them and that their cost can be reliably determined. They must also be under company control either by contractual agreement or other legal rights and be capable of sale, transfer, licensing, rental or exchange. Revaluation of assets is only permitted where an active market exists for determining fair value.
Internally generated brands, mastheads, publishing titles, customer lists and similar items will not be recognised as intangible assets.
As a result of the new rules, Australian companies must:
(a) Expense all research costs, which must be separated into research phase and development phase where development phase costs can only be capitalised if certain criteria can be demonstrated such as technical feasibility; and
(b) Separate intangible assets into those with limited or indefinite lives and give fair valuation to those assets where:
• Assets with limited lives are valued based on a cost and amortisation model;
• Assets with indefinite lives are valued based on a cost and annual impairment model.
Companies will need to review their current valuations and this may necessitate an audit of their IP portfolio. For further information, please contact us at Shelston IP. *(AASB 136 & 138 available at www.aasb.com.au)
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