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• this article equates "physical" with "easily convertible (into money)". Is this justified?
• the only example given in the introduction is a negative example.
• the only content of the article is goodwill. Are there other examples? Should the article be renamed?
• goodwill and customer base. What matters seems to be not the size of the customer base, but its fidelity.

-- Miguel

Hopefully Answers:

• Intangible assets are hard to get your hands around (sorry, had to use the pun). Intangible assets provide a company or organization an economic benefit in the same way every other asset does. McDonalds owns the name and classifies it as an intangible. This helps McDonalds because nobody else can use the name. If someone does use the anem and McDonalds takes them to court and wins, the extra legal costs can be capitalized and amortized.
• I think I fixed that.
• Yes. No, it does not need to be renamed.
• If a company purchases another company (or a part of it), goodwill is the "difference" between the net assets (Assets - Liabilities) and what was paid for the business/segment. Goodwill can be positive, representing the purchaser believes there is extra value in the business, or there can be negative goodwill. You seem to have customer base right... Zoop 14:55, 13 August 2005 (UTC)Reply[reply]

• Adding the classification of cash flow activity that intangible assets are would be beneficial. I believe it's an investing activity (rather than operating or financing). However I can't find any evidence supporting this, so I'll leave it to the experts! Mike.Suro (talk) 00:54, 19 January 2011 (UTC)Reply[reply]

Hi, first of all, this is my first time posting a comment, so if I did something worng, I apologize and please let me know how it can be done. Also, maybe I missed it but I cannot find anywhere within the discussion to reply or post a comment, editing the page was the only way I could of done it. If anyone can show me where I can just simply "start a thread" that would be great.

Anyway, I've noticed that in the article there is the folloinw description under Financial Accounting: "In general, legal intangibles that are developed internally are not recognized and legal intangibles that are purchased from third-parties are recognized. Wordings are similar to IAS 9" This might not be accurate."

First I am confused with the phrase "legal intangibles". Looking at IAS 38, and after I have read most of the (2009 version) IFRS/IAS sections,(part of my job) I have not come across the term legal intangibles in IFRS. So I am not sure what it refers to.

Second, recognition criteria set forth under IAS does not distinguish the origin of the intangible asset. The recognition criteria set forth in IAS 38.9-24 applies equally to externally acquired intangible assets and internally generated intangible assets. The only difference being that for interally generated intangible assets, only expenditures incurred under development phase can be capitalize, and they are subject to an additional set of recognition criteria.

Saying "In general, internally generated intangible assets are not recognized" could be quite misleading. As it does not appear anywhere within IAS 38 and I don't believe it is generally accepted business practice to expense all expenditures on internally generated intangible assets. If this is the case, then it would be hard to explain why IAS 38.51-67 is included, which explicitly discuss how to recognize internally generated intangible assets.

Wikipedia has been an useful tool for me, so I figure I would put in my 2 cents.

-- phatpanda114 —Preceding undated comment added 18:23, 26 October 2009 (UTC).Reply[reply]

Hi everyone, just a quick introduction about myself as this is my first contribution to Wikipedia. I am a qualified accountant and an early-career academic. I have a particular interest in intangible assets, hence the selection of this article to be my first. :)

The new lead section adopts a familiar textbook approach to the definition of an intangible asset. It describes the "evolution" of the intangible asset definition beginning with the Australian standards prior to 2005, then proceeding to IASB and FASB definitions. It provides examples of what intangibles are and how the definitions describe what they are not (but are commonly mistaken by first-year students to be intangibles).

Hopefully the new edit is helpful. I plan to make more revisions to this article as it is quite inaccurate and lacking in many respects. Shaun Steenkamp (talk) 05:07, 19 December 2012 (UTC)Reply[reply]

I propose the removal of this paragraph:

The classification of research and development expenditure can be highly subjective, and it is important to note that organisations may have an ulterior motive in its classification of research and development expenditure. Less scrupulous directors may manipulate financial statements through their classification of research and development expenditure.

While it may be true it is very difficult to prove and academic research on the subject is tentative at best. Furthermore, for something to be classified as a development cost it must satisfy 6 requirements that are not easy to circumvent. Finally, if managers wish to manipulate reported earnings for any reason it's not a matter for accounting standards, ultimately auditors will pass judgement on whether a particular cost falls into either the research or development phase. What do you think?

Shaun Steenkamp (talk) 08:56, 19 December 2012 (UTC)Reply[reply]

Dr. Dauchy has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

It would be worth mentioning in the introduction that above all an intangible asset is a source of future benefit, like physical assets (machinery, software, buildings). The main difference with physical assets is that intangible assets lack physical form or substance. Also, contrary to other assets, they generally--though not necessarily--suffer from typical market failures of non-rivalry and non-excludability because they are difficult to identify and measure.[1] The lists and recovery periods of intangible assets might differ for accounting- and tax- purposes. For example, organizational skills are generally not treated as intangible assets for tax-purposes but might be recognized for legal purposes.[2]

More about R&D:

The authors should mention that R&D is considered as one among several other intangible assets (e.g., about 16 percent of all intangible assets in the US)[4], even if most countries treat R&D as current expense for both legal and tax purposes. While most countries report some intangibles in their National Income and Product Accounts (NIPA), no country has included a comprehensive measure of intangible assets. Yet, economists recognize the growing contribution of intangible assets in long-term GDP growth.[5] In 2013, the United States’ Department of Commerce announced its first comprehensive revision of NIPA accounts to include two types of intangible assets[4], published as “satellite accounts” and including R&D and investment in artistic originals (mainly motion pictures and sound recordings).

More about taxation:

Given the growing importance of intangible assets as a source of economic growth and tax revenue,[5] as well as the fact that their non-physical nature makes it easier for taxpayers to engage in tax strategies such as income-shifting or transfer pricing,[6] tax authorities and international organizations have been designing ways to link intangible assets to the place where they were created, hence defining nexus. In addition, as intangible assets seem to generate above-average returns [7], governments have designed several ways to promote investment in these assets. For instance, governments typically provide a variety of back-end tax incentives including tax credits, super-deductions, or accelerated depreciation, though mainly for R&D.[8] Several economists have evaluated the effectiveness of tax incentives for R&D[9] or studied how the interactions between intangible assets and physical assets might affect the effectiveness of tax policy.[10] A few countries also provide front-end incentives, mostly designed tax rebates (reduced corporate tax rates) for R&D income, known as Intellectual Property Box regimes (IP Box) or Patent Box regimes.[11]

Measurement

The article also forgets to mention important facts about the measurement of intangible assets. Economists and accountants have developed a variety of methods to approximate most intangible assets, which one can divide in two groups: resource-based approaches in which the measurement is based on the amount of spending required to generate intangibles (such as R&D expenses or compensation of employees engaged in research), or output-based approaches where measurement is based on the amount of value-added generated by intangible assets (e.g., royalty income from licensing patents).[3,12]

References:

[1] Webster, Elisabeth; Jensen, Paul H. (2006). "Investment in Intangible Capital: An Enterprise Perspective." The Economic Record, Vol. 82, No. 256, March, 82-96.

[2] For a list of intangible assets that can be amortized for tax purposes in the United States, see: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Intangibles.

[3] For examples of resource-based and output-based approaches to measuring intangible assets, see Lev, Baruch. (2005). "Intangible Assets: Concepts and Measurements." Encyclopedia of Social Measurement, Vol. 2. Elsevier Inc.

[4] Bureau of Economic Analysis. (2013). ” Preview of the 2013 Comprehensive Revision of the National Income and Product Accounts.” http://www.bea.gov/scb/pdf/2013/03%20March/0313_nipa_comprehensive_revision_preview.pdf

[5] Corrado, Carol. Charles Hulten, and Daniel Sichel. (2006). "Intangible Capital and Economic Growth." Federal Reserve Board Discussion Paper N. 2006-24. April. http://www.federalreserve.gov/pubs/feds/2006/200624/200624pap.pdf

See also: Organisation for Economic Co-operation and Development (OECD), "New sources of growth: intangible assets": http://www.oecd.org/sti/inno/46349020.pdf

[6] "Action Plan on Base Erosion and Profit Shifting." (2013). Organisation for Economic Co-operation and Development (OECD). http://www.oecd.org/ctp/BEPSActionPlan.pdf

See also: PriceWaterHouseCoopers: "BEPS Action Plan: Action 8 – Transfer pricing and intangibles," 24 September 2014. http://www.pwc.com/gx/en/tax/tax-policy-administration/beps/transfer-pricing-and-intangibles.jhtml

[7] Megna, Pamela; Dennis C. Mueller. (1991). "Profit Rates and Intangible Capital." The Review of Economics and Statistics, Vol. 73, No. 4., November, pp. 632-42.

[8] Warda, Jacek (2006), "Tax Treatment of Business Investments in Intellectual Assets: An International Comparison", OECD Science, Technology and Industry Working Papers, 2006/4, OECD Publishing.

doi:10.1787/672304513676

For R&D tax incentives, see OECD. (2013). " Maximizing the benefits of R&D tax incentives for innovation." Available at http://www.oecd.org/sti/rd-tax-incentives-for-innovation.pdf

[9] Hall, Bronwyn, and John Van Reenen. 2000. "How Effective Are Fiscal Incentives for R&D? A Review of the Evidence." Research Policy, 29(4-5): 449-69.

[10] Chen, Sophia, and Estelle P. Dauchy. 2015. "Tax-Adjusted Q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives." Available at SSRN: http://ssrn.com/abstract=2599065.

See also: Mahon, James, and Eric Zwick. 2014. “Do Financial Frictions Amplify Fiscal Policy? Evidence from Business Investment Stimulus.” Harvard University Working Paper.

[11] Evers, Lisa; Helen Miller; Christoph Spengel. 2015. "Intellectual property box regimes: effective tax rates and tax policy considerations." International Tax and Public Finance. International Tax and Public Finance. June 2015, Vol. 22, No. 3, pp 502-30.

[12].For information on existing data in OECD countries, see Organization for Economic Co-operation and Development (OECD).

"Measuring Intangibles to Understand and Improve Innovation Management." http://www.oecd.org/sti/ind/1947863.pdf

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Dauchy has published scholarly research which seems to be relevant to this Wikipedia article:

• Reference : Estelle P. Dauchy & Sophia Chen, 2014. "Tax-adjusted Q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives," Working Papers w0207, Center for Economic and Financial Research (CEFIR).

ExpertIdeasBot (talk) 17:30, 3 June 2015 (UTC)Reply[reply]