New Horizons in Intellectual Property series
Edited by Derek Bosworth and Elizabeth Webster
Chapter 3: An Accounting Perspective
Anne Wyatt 1 THE ACCOUNTING DEFINITION Intangible capital (IC) and intellectual property (IP) are not speciﬁcally deﬁned in accounting regulations. Instead, as productive resources (or inputs), the individual components of IC and IP are reported as assets on the balance sheet if the asset deﬁnition and the asset recognition rules in the accounting regulations are satisﬁed. Deﬁnition and recognition rules in the accounting regulations are applied in a two-stage process. We ﬁrst apply the deﬁnition rules and, if these are satisﬁed, the second stage is to then apply the recognition rules. Satisfying the ‘deﬁnition’ rules means the item has attributes that ﬁt the deﬁnition criteria. Satisfying the ‘recognition’ rules means that this item meets the recognition rules and can therefore be recorded in the ﬁnancial statements – one or more of the proﬁt and loss statement, balance sheet, and cash ﬂow statement. The alternative to recognition is disclosure. ‘Disclosure’ means that either quantitative or qualitative information about the item is included in the explanatory notes to the ﬁnancial statements. However, the item is not recorded in the accounting system or reported in the ﬁnancial statements. 1.1 Deﬁnition According to the International Accounting Standards Board (IASB),1 in their Framework for the Preparation and Presentation of Financial Statements (the Framework), an asset is deﬁned as ‘a resource controlled by the entity as a result of past events and from which future economic beneﬁts are expected to ﬂow to the...
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