Methods and Applications
Edited by Federico Munari and Raffaele Oriani
Chapter 11: Valuing Patents for Accounting Purposes
Serena Morricone 11.1 INTRODUCTION Previous chapters have widely discussed why patent valuation is important. The growing value of patents is also associated with a relevant need for information for different corporate stakeholders. Since financial reporting represents the foremost channel of information between the firm and its stakeholders, the issue of accounting valuation of patents is critical. The main objective of this chapter is to analyze accounting standards of different countries, such as the US and Europe, and their implications for the accounting valuation of patents. In particular, this chapter deals with two interrelated aspects. First, it presents the general problems of evaluating patents for accounting purposes, discussing the problems of recognition, measurement and disclosure. Secondly, it focuses on the main divergences in the accounting valuation of patents between International Financial Reporting Standards (IFRS) and US accounting standards (US General Accepted Accounting Principles (GAAP)). This comparison between accounting valuation criteria is also compelling in the light of ongoing international harmonization of accounting standards.1 In 2005 all European companies traded in stock markets have compulsorily adopted the International Financial Reporting Standards (hereby IFRS). Recently, the US SEC issued proposals that could allow US companies to use IFRS after 2011 and could lead to mandatory transition to IFRS for domestic issuers starting from 2015. This chapter is organized as follows. The next section will deal with the general problems of evaluating patents for accounting purposes. Sections 3 and 4 will examine, respectively, initial recognition and measurement of patents highlighting the main divergences between...
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