What does Developing Intangible Assets mean?

infoCenter (as of June 2020)

Internally generated intangible assets / objects (IFRS, HGB)

1. Definitions

Commercial law does not contain an independent definition of the concept of an intangible asset (for the concept of an asset, see Section 2.2). However, the definition of IFRS accounting can be used. There will be aintangible asset defined as an identifiable, non-monetary asset without physical substance (similar to DRS 24.8) (IAS 38.8).

Central to the approach and the evaluation internally generated intangible assets or assets is - both in international accounting and according to HGB - theDifferentiation from research anddevelopment.

TheResearch phase is defined as thatindependent and systematic search for new scientific or technical knowledge (IAS 38.8). For example, the search for alternatives for materials, devices, products and procedures for the research phase (IAS 38.56 (c)) counts. Transferred to the case of self-creation of websites, activities such as the preparation of feasibility studies, the determination of hardware and software specifications, the evaluation of alternative products and providers as well as the establishment of preferences or selection decisions belong to the "research phase". Section 255 (2a) of the HGB, which was inserted into the HGB by the BilMoG, almost literally adopts this definition. According to Section 255, Paragraph 2a, Clause 3 of the German Commercial Code, theresearch the independent and systematic search for new scientific or technical knowledge or experience of a general nature, about the technical usability and economic success prospects of which, in principle, no statements can be made.

ThePhase of development) is defined as thatApplication of research results or other knowledge of a plan or design for the production of new or significantly improved materials, devices, products, systems, or services prior to commercial production or use (IAS 38.8). IAS 38.59 lists individual examples of development activities:

  • the design and construction of prototypes and models before the actual production or use begins,

  • the design of tools, clamping devices, dies and molds using new technologies,

  • the design and operation of a pilot plant, which, however, is unsuitable for economic production.

    In the case of self-creation of websites, the following phases typically belong to the development phase (SIC-32):

    • the application and infrastructure phase (in detail acquisition of the hardware, receipt of a domain name, development of the operative system and server software, development of a user code, installation of developed applications on the web server and test phase) as well as

    • the graphic design and development phase (in particular graphic design of "websites", creation, purchase, preparation and loading of texts and graphics for the information to be presented on the websites).

Here, too, the HGB i. d. F. of the BilMoG adopted the definition of IFRS accounting.development is the application of research results or other knowledge for the new development of goods or processes or the further development of goods or processes by means of significant changes (Section 255 (2a) sentence 2 HGB).

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literature

Working group "Intangible values ​​in accounting" of the Schmalenbach-Gesellschaft für Betriebswirtschaft e. V., guidelines for accounting for self-created intangible assets according to the government draft of the BilMoG, DB 34/2008 p. 1813

Grottel in Grottel et al. (Ed.), Beck’scher balance sheet commentary, 12th edition 2020, § 315 HGB

Kahle / Haas, production costs of internally generated intangible fixed assets, WPg 1/2010 p. 34

Kirsch, Intangible Assets: Delimitation and Approach according to DRS 24, BBP 2016 p. 254

Küting / Ellmann in Küting / Pfitzer / Weber (eds.), The new German accounting law, 2008, p. 243

Lüdenbach / Hoffmann / Freiberg (eds.), Haufe IFRS Commentary, 18th edition 2020, § 13 Intangible assets

Seidel / Grieger / Muske, accounting for development costs according to the BilMoG, BB 24/2009 p. 1286

Tanski in Petersen / Zwirner (Hrsg.), Systematischer Praxiskommentar Bilanzrecht, 4th edition 2020, § 246 HGB

2. Approach criteria

2.1. IFRS

Expenses included in the Research phase are incurred as Effort of the period in which they occur (IAS 38.54). These expenses cannot be capitalized - retrospectively - if the knowledge generated in the research phase can be successfully transferred to the development phase.

A company reporting in accordance with IFRS only has to capitalize the costs for an asset in the process of being created if the "internal project" is already in the process of being generated "Phase of development" located that too clearly distinguishable from research is (IAS 38.53). At the same time, it cumulatively fulfills the following in IAS 38.57 contained special (Objectification) criteria and proves this:

  • Verifiability of the technical feasibility of completing the asset for later use or marketing (IAS 38.57 (a)),

  • Company's intention to complete the asset for later use or commercialization (IAS 38.57 (b)),

  • Ability of the entity to use or market the asset (IAS 38.57 (c)),

  • Evidence of the achievement of future economic benefits using the principles of IAS 36 (IAS 38.57 (d) in conjunction with IAS 38.60),

  • Availability of adequate technical, financial and other resources to complete the development and to market or use the asset (IAS 38.57 (e)), and

  • Ability to reliably determine the expenses incurred during development (IAS 38.57 (f)).

Despite the presence of the criteria specified in IAS 38.57, Brand names, trademarks, printing and publishing rights, customer lists and customer relationships as well as similar values not activated - in the absence of a distinction from internally generated goodwill (which is also prohibited from being capitalized under IAS 38.48) (IAS 38.63).

Capitalization of costs may only begin once the criteria specified in IAS 38.57 have been fully verified (i.e. capitalization of previously incurred costs is excluded (IAS 38.54)). There is thus a high accounting policy design potential when recognizing self-created intangible assets, as the accounting party decides, depending on the documentation of these capitalization requirements, whether and, if so, from what point in time the capitalization of expenses incurred during the development phase begins ("Right to choose evidence"). As evidence of the capitalization requirements specified in IAS 38.57, the accounting party must make both technical and economic forecasts:

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