General Accounting Methods For Intangible Assets

First, the basic principles of accounting for intangible assets, accounting for intangible assets, should generally be phased and follow the following principles: 1. When acquiring intangible assets, the principle of real cost should be followed.

The principle of real cost requires that assets be measured at the paction price at which they are acquired, incurred or formed.

Its main advantage is verifiability, which represents the legal basis for the exchange price agreed by buyers and sellers in the market.

Therefore, the accounting standards for enterprises in China clearly stipulates that "intangible assets purchased should be accounted for according to actual costs".

Actual cost can include purchase price, necessary handling fee and legal cost.

In the part of self created intangible assets, the accounting standards for enterprises consider that it should be accounted for according to the actual expenditure incurred in the development process, usually including those that can be directly identified, but also the protection costs incurred in order to protect the rights.

In the case of accounting for patent and trademark rights, two points should be grasped: first, according to accounting practice, advertising costs should not increase the cost of trademark rights, and should be included as sales expenses in the period of occurrence.

Second, although patent rights and trademark rights are protected by law, there will still be violations.

There are two ways to deal with the expenses incurred by the enterprises enjoying rights in order to protect their rights. One is to capitalization and increase the value of the patent; the other is to bear the current business income as a period cost.

In this case, we need to discuss the relationship between the cost of self created intangible assets and its value disclosure.

Although there is uncertainty in the development and design process of self created intangible assets, it has the characteristics of "excess profitability" after its creation and acquisition in accordance with the law, and the cost of self creation is often lower than its value, sometimes even very small, and the value is enormous.

For example, the value of trademark rights is estimated to be $39 billion 900 million, "Coca-Cola" is $33 billion 400 million, and "Tsingtao Brewery" is 209 million yuan.

The value of these trademarks is far from the cost incurred to achieve this value.

It is difficult to give information users useful information related to decision-making simply by replacing the value of fees with the value reflected in the account.

Therefore, we believe that we should use the cost plus method to determine the value of self created intangible assets on the basis of determining the cost of self created intangible assets on the basis of the actual cost principle. The key is to determine an appropriate cost profit rate.

Such amount should be reflected in the additional statement of financial statements.

2, during the use of intangible assets, the principle of proportioning should be applied.

The matching principle requires that the cost be related to the relevant income and be confirmed in the same period.

Accordingly, the amortization of intangible assets should be matched with the excess returns.

3, handling intangible assets should be based on the principle of revenue recognition.

The principle of income recognition, that is, the difference between the compensation price and its book value received from an intangible asset, should be included in the profits or losses of the current period.

4, substance is more important than form.

This principle means that when accounting is confirmed, it should not be rigidly adhered to in the form of law according to the economic essence.

For example, the patent technology and the secret know-how produced by enterprises are not registered by the public, but they are not protected by the law. In essence, they can be recognized as intangible assets and are accounted for by the fact that they can bring benefits to the enterprises that exceed the normal profits.

As for the right to lease, although the ownership of financial leasing assets belongs to the lessor in the legal form, in a non cancellable financial leasing relationship, most of the risks and rewards of the leased assets have been pferred to the lessee, and the lessee obtains the proceeds arising from the use of the asset, so it should be capitalized on the accounting statements of the lessee.

Two, the confirmation of intangible assets. The problem of intangible assets is that the intangible assets that meet the conditions can be accounted for as intangible assets of enterprises.

First, as an asset of an enterprise, the recognition of intangible assets should not only follow the general accounting principles mentioned above, but also conform to the general recognition standard of assets, that is, the two standards stipulated in the framework of the Accounting Standards Committee for the preparation and provision of financial statements issued in 1989: first, the future economic benefits related to the project will flow into enterprises; second, enterprises can reliably measure the cost of the assets.

Secondly, we should give full consideration to the possibility and stability of earnings and supplement the recognition standard in view of the particularity of intangible assets.

In view of this, the International Accounting Standards Committee (IASC) considers that the following two criteria should be attached to the intangible assets principles announcement (Draft): first, the role of intangible assets in promoting the future economic benefits expected to flow into enterprises, and the ability of intangible assets to effectively play this role can be proved; second, there is sufficient resources or usefulness to prove that enterprises can obtain the future economic benefits that are expected to flow into the enterprise.

The draft of the specific guidelines for intangible assets in China will stipulate the standard of intangible assets as follows: "intangible non monetary items should be recognized as intangible assets of enterprises when meeting the following conditions: (1) the role of the project in facilitating the economic benefits of enterprises and the ability to play such a role can be proved; second, the cost of obtaining the project can be measured reliably."

According to these two standards, the proprietary technology and self created goodwill created by enterprises can not be recognized as intangible assets.

Take goodwill as an example, this method of handling is obviously consistent with the traditional view of the accounting profession on goodwill, that is, only the difference between purchased price and the fair value of the identifiable net assets of the purchased enterprise can be recognized in the accounting.

The non purchase goodwill is the self created goodwill formed by the enterprise in the course of continuous operation. It can not be confirmed in any state.

However, since 80s, the reality of economic development has had an impact on this view.

In the increasing number of mergers and acquisitions, many enterprises often pay heavily to acquire other enterprises, and 80% or even 90% of the purchase price is due to goodwill.

The emergence of such a great goodwill value in merger is obviously not due to the acquisition, reorganization or merger of an enterprise, only when it is acquired, restructured or merged.

Self created goodwill is a comprehensive result of past pactions. It is an excess economic benefit created and maintained by an enterprise through its own efforts and maintained and developed. It is consistent with the definition of assets and is consistent with the first standard of asset recognition. It should be confirmed in accordance with the accrual basis principle.

At the same time, the development of accounting theory in recent years has challenged the theoretical foundation of non recognition of self generated goodwill.

The reason for not recognizing the self created goodwill is that the self created goodwill is not measurable, and it is contrary to the principle of recognition and conservatism, the historical cost and the accounting basis, and the accounting objective.

Concretely speaking, there are three points: 1, the accounting objectives are changed from emphasizing profitability to paying more and more attention to the information needs of cash flow, time distribution and uncertainty, which are most concerned by information users. Goodwill, as a direct embodiment of future excess profits, is an important resource for the future beneficial cash flow of enterprises. Undoubtedly, it should be fully disclosed in the financial report under the constraint of "cost greater than efficiency", so as to reflect it faithfully and appropriately.

2, in recent years, the accounting circles have reconsidered the traditional principle of prudence. More and more people have noticed that they should not only consider liabilities or losses, but also reflect profits or gains.

Self created goodwill is a kind of assets that can bring future excess profits, and should also be distinguished from the degree of uncertainty.

3, the foundation of historical cost accounting has been shaken.

From the rise of price change accounting to the emergence of innovative financial instruments in 80s, the foundation of historical cost accounting has been constantly impacted.

For example, financial instruments only generate the rights and obligations of contracts. As long as the contract is established, when the paction or matter has not yet occurred, the remuneration and risk between the two parties have started to pfer. The accounting must be confirmed in advance, that is, the contract signing time is the standard and the fair value is calculated.

This practice breaks through the limitation of traditional accounting principles and historical cost principles.

In the modern accounting mode with multiple measurement attributes, the recognition of self generated goodwill is not only necessary but also possible for those enterprises with high management level and technical level, good corporate image and relatively stable excess profits for several consecutive years.

Three of intangible assets measurement, intangible assets measurement, intangible assets measurement are based on original cost (historical cost), current cost (replacement cost), market price (negotiated price or fair price), current value (i.e. current value) and so on.

Similar to the measurement of fixed assets, intangible assets can be stipulated in different ways of obtaining different measurement methods.

With the different purposes of intangible assets measurement, such as pfer, sale, investment and claim compensation, intangible assets measurement methods usually have the following: 1, replacement cost method.

To calculate intangible assets in this way, we must first calculate the current market price of intangible assets, that is, fair prices in the market, and then deduct the losses and invalidation values during the period of use. The difference is the current value of intangible assets.

The formula is: the current value of intangible assets = the replacement cost of intangible assets - the loss value of each factor.

Because the replacement cost is calculated according to the current market price, material cost is calculated according to the actual working hours and hourly wage rates, and the hourly rate is calculated. Therefore, this method is generally applicable to the valuation of the intangible intangible assets for the purpose of value compensation.

2, income present value method.

There are two different approaches to this approach: one is the annual sales revenue realized directly by the intangible assets, which is extracted year after year in a certain proportion.

At present, the percentage of intangible assets imported from foreign countries is about 0.5% to 3% of sales revenue.

Leasing or leasing such intangible assets, such as patent right, franchise, copyright, etc., can calculate the present value of annuity according to the rate of return and the agreed time limit, that is, the present value of the proceeds.

The other is to calculate the present value of annuity based on the estimated annual earnings and return on investment that will be sustained in the next few years.

In the process of calculation, the present value table of annuity should be checked according to the rate of return and time limit, and the present value coefficient of annuity can be obtained.

The present value method of income is generally applicable to the pfer of intangible assets when they are used.

3, excess income method.

It refers to the present value of the total income that can be obtained from enterprise intangible assets in the future period according to historical data, and deducts the current value of all the intangible assets that can be obtained in the future period according to the general income level of the same industry, and the difference is the excess present value of the intangible assets of the enterprise.

The calculation formula is: n nV = sigma [total assets * expected rate of return (1 discount rate) [n]] - Sigma [assets i=1 i=1 total i=1 * normal rate of return in the same industry (1 discount rate) [n]] this method is generally applicable to the valuation of intangible assets when they are pferred out.

Four, intangible assets amortization, intangible assets, as a special long-term asset, whether it is for financial reporting purposes or for asset management needs, must be amortized in a systematic way within its estimated useful life, and reasonably determine the earnings of each accounting period.

There is no residual value in intangible assets. Their life expectancy, that is, their useful life, is the period of amortization.

The effective years of different intangible assets are different.

The relevant regulations of our country stipulate that the amortization period of intangible assets is: the utility model and the design right are 5 years, the trademark right is 10 years, the invention patent is 15 years, and the goodwill has no legal age.

At the same time, the intangible assets of the same project are different in different countries.

On the issue of amortization of intangible assets, there are more controversies on the following two questions.

The first is the amortization of intangible assets.

(1) with the rapid development of science and technology and the rapid development of technology, intangible assets represented by electronic technology are very intangible. Therefore, many enterprises demand that amortization of such intangible assets be completed as soon as possible, so as to ensure the recovery of investment and the opening of new technologies and products.

They advocate generally four years.

2. Intangible assets have legal protection period or contractual right years, and their amortization period should not exceed them.

(3) the period of amortization should be set by a accounting standard setting institution for a maximum period.

In 1970, American AICPA's APB regulations did not exceed 40 years.

The business plan of modern large companies usually does not exceed 20 years.