Transfer Pricing Associates

International Accounting Standards

For companies or accountants concerned with IP accounting, it can sometimes be difficult to find the proper reference points when trying to determine what types of IP are relevant for accounting purposes and if that reference’s guidance aligns with the respective jurisdictions where the IP is held or managed. 

International Accounting Standards Board

The International Accounting Standards Board (IASB) is organized under an independent foundation named the IFRS Foundation with its main responsibilities being to promulgate International Financial Reporting Standards and Exposure Drafts, and approve interpretations developed by the International Financial Reporting Interpretations Committee (IFRIC).  As written in IAS 36, the project’s objective is to improve the quality of, and seek international convergence on, the accounting for business combinations and the subsequent accounting for goodwill and intangible assets acquired in business combinations.  The board’s mission statement reflects its participation and guidance for the following areas:

As defined by the IAS, an intangible asset is an identifiable nonmonetary asset without physical substance. An asset is a resource that is controlled by the entity as a result of past events (for example, purchase or self-creation) and from which future economic benefits (inflows of cash or other assets) are expected. [IAS 38.8] Thus, the three critical attributes of an intangible asset are:

1.      identifiability

2.      control (power to obtain benefits from the asset)

3.      future economic benefits (such as revenues or reduced future costs)

An intangible asset is considered identifiable when it: [IAS 38.12]

Examples of possible intangible assets according to the IAS include:

The IAS also gives the following rules on how intangibles can be acquired:

IAS 38 requires an entity to recognize an intangible asset, whether purchased or self-created (at cost) if, and only if: [IAS 38.21]

This requirement applies whether an intangible asset is acquired externally or generated internally.

For additional information regarding IP Accounting standards, please visit the IFRS website.