« Co-Creation | Main | UK intangible economy »
May 06, 2008
Determining the useful life of intangibles
FASB has recently issued new staff guidance on intangibles -- FASB Staff Position FAS 142-3, Determination of the Useful Life of Intangible Assets. According to the project summary:
The objective of this project is to provide guidance on the determination of the useful life of intangible assets in accordance with FASB Statement No. 142, Goodwill and Other Intangible Assets. In particular, the Board aims to improve the consistency between the useful life of a recognized intangible asset under Statement 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141, Business Combinations, and other applicable accounting literature.
In other words, this deals with the technical problem of the potential difference, in accounting terms, between the expected cash flow of an intangible (which may be determined by contractual arrangements that may or may not be extended) and what is considered "useful life” of the asset. (See also BNA Software's explanation of the guidance.)
OK, so now that this technical matter is resolved, can we move on to the real issue: that 141 and 142 only apply to intangible assets acquired from outside. The accounting profession still hasn't faced the issue of how to account for internally generated intangibles -- such as a company's patent portfolio. In today's I-Cubed Economy, that is a huge gap in GAAP.
Posted by Ken Jarboe at May 6, 2008 11:19 AM
Trackback Pings
TrackBack URL for this entry:
http://www.athenaalliance.org/mt/mt-tb.cgi/1917