the term "intangible assets" has different definitions in different disciplines and different application environments. China's "Accounting Standards for Business Enterprises-Intangible Assets" defines intangible assets as "non-monetary long-term assets held by enterprises for producing goods, providing services, renting them to others, or for management purposes without physical form". [1] This definition is basically consistent with the definition of International Accounting Standards No.38 [2], but the difference is that international accounting standards exclude goodwill, while accounting standards in China include goodwill. However, International Accounting Standard No.22-Business Combination [3] stipulates the accounting treatment of goodwill, that is to say, international accounting standards actually think that goodwill can be confirmed, and the intangible assets standard being revised in the United States regards goodwill as a kind of intangible assets. China's "Assets Appraisal Criteria-Intangible Assets" defines intangible assets as: "Resources that are controlled by a specific subject, have no physical form, play a long-term role in production and operation, and can bring economic benefits." [4] And goodwill is also regarded as a kind of intangible assets. The definition of intangible assets in International Appraisal Criteria-International Appraisal Guide IV-Intangible Assets is: "Intangible assets are assets that show their existence by their economic characteristics. Intangible assets have no specific physical form, but they gain rights and privileges for their owners and usually bring benefits to their owners." [5] It also lists goodwill as a kind of intangible assets.
in accounting standards, intangible assets are mainly defined from the perspectives of accounting recognition, measurement and reporting. It is generally believed that the financial accounting report should provide information about the available resources of the assets of the accounting entity, so it is necessary to price the intangible assets separately. However, due to the great uncertainty of the future benefits of intangible assets and the lack of an active market, the feasible measurement attribute should be historical cost or cost adjusted according to general purchasing power changes. This requires that there must be transactions or events, and the cost of each intangible asset can be identified separately, so the single intangible asset recognized separately in accounting must be identifiable. Goodwill can only be recognized when the enterprise is transferred as a whole, that is, when a transaction occurs and the cost can be measured reliably. In this way, the relationship intangible assets explicitly mentioned in the international evaluation criteria, such as the combination of staff and the relationship with customers, cannot be recognized separately as intangible assets in accounting. This kind of relational intangible assets is non-contractual, short-term and difficult to control. From a cautious point of view, China limits intangible assets to the long-term role in asset evaluation criteria, and accounting standards also limit intangible assets to long-term assets, which can be said to exclude all relational intangible assets. Theoretically, the value of an asset lies in its future economic benefits, and the acquisition cost of a tangible asset can be regarded as a current estimate of the present value of the inflow of future economic benefits of the asset. Intangible assets, especially self-created intangible assets, because their acquisition expenditure is long-term and difficult to accurately refer to, only a small part is recognized as acquisition cost in accounting, so the acquisition cost is weakly related to its future economic benefits. In accounting, intangible assets are measured by acquisition cost, and intangible assets are underestimated in many cases. Therefore, with the help of scientific intangible assets evaluation, it is necessary to adjust the intangible assets recognized by accounting in theory.
The asset appraisal criteria emphasize the future economic benefits of intangible assets, but do not pay attention to whether the acquisition cost can be ascertained. Although the cost method can sometimes be used to evaluate intangible assets, it is generally believed that cost and the value of intangible assets are irrelevant in most cases. The definition of intangible assets in asset appraisal criteria is closer to its economic meaning. Economically speaking, intangible assets are the representative of a certain kind of value. This kind of value is the surplus of the enterprise's profit (that is, the part of the profit that exceeds the interest due to its capital and the remuneration due to entrepreneurs). The present value discounted at a certain interest rate. It emphasizes that intangible assets can bring excess returns, without distinguishing whether they can be identified separately.
all the above explanations about intangible assets have their own emphases, and each takes into account the characteristics of the subject, so it doesn't matter who is right or wrong. From the perspective of asset evaluation, there are two main problems to be solved: first, what kind of economic phenomenon can be evaluated as intangible assets, that is, what attributes intangible assets should have in asset evaluation; Second, what kind of economic phenomenon can show or show the value of intangible assets, thus providing a basis for evaluating the value of intangible assets.
II. Attributes of intangible assets
(1) Intangible assets should be property with property rights and responsibilities
As a property with property rights, it should be describable and accurately identifiable, that is to say, it should have obvious boundaries. Goodwill can't be identified separately in the normal operation of an enterprise. Therefore, whether goodwill is regarded as intangible assets is still controversial.
as a property, its property rights should be protected by law, which means that the economic benefits brought by the property can be controlled by the enterprise. From this perspective, relational intangible assets do not meet the property requirements. Although it can bring economic benefits to enterprises, such economic benefits are uncontrollable and have great uncertainty, because the relationship itself is not protected by law. The economic benefits brought by asset appraisal to intangible assets refer to its expected future benefits, not its actual or past actual benefits. This requires enterprises to legally control the future economic benefits of intangible assets, and the future of the relationship is very uncertain, so it is not very reasonable to be an intangible asset. From the perspective of risk assessment, it is not advisable to evaluate the so-called intangible assets that are not protected by law.
as a target intangible asset, it is not necessary to have all legal property rights, such as the right to dispose of it. Some intangible assets, such as franchise rights granted by the government, bring obvious economic benefits and can be controlled by enterprises and protected by law. But this right cannot be transferred at will. Whether it can be used as a target intangible asset in asset evaluation mainly depends on whether it can bring controllable expected economic benefits to the enterprise, and its qualification as a target intangible asset cannot be denied because it has no disposal right. Accounting does not require all legal property rights to be used as an enterprise's assets. It focuses on whether the risk and reward of an asset are controlled by the enterprise. From this point of view, the definition of assets in asset evaluation and accounting is basically the same.
Of course, the controller of intangible assets, like other assets, should also bear corresponding responsibilities, such as paying taxes, accepting government supervision and taking legal responsibility for the losses caused by intangible assets to others.
(II) Intangible assets do not have physical form
This is an obvious feature that distinguishes intangible assets from tangible assets. Tangible assets should be in physical form, tangible and visible, for example, you can touch and see factories, equipment, inventory and so on. But the proof documents of intangible assets are also tangible and visible, for example, you can also touch and see patent certificates, franchise agreements, etc. On the other hand, the value of tangible assets and intangible assets essentially comes from their property rights, which are intangible. From the formal point of view, the difference between tangible assets and intangible assets is not obvious, so it should be investigated in essence to distinguish tangible assets from intangible assets. The essential difference between tangible assets and intangible assets lies in: The value of tangible assets is created by its tangible nature; The value of intangible assets is created by its intangible nature, that is to say, tangible assets are endowed with value by tangible, tangible and visual factors. The value of tangible assets comes from its material characteristics. Although its property right is intangible, it comes from its material characteristics. The value of intangible assets comes from some rights, such as permission, mortgage, etc., or from some intangible factors, such as competitive advantage, uniqueness, etc. The source of value of these intangible assets is intangible.
it is precisely because the value of intangible assets comes from its intangible characteristics that it must be able to provide tangible proof of the existence of intangible assets if it is to be recognized and protected by law. Some intangible factors such as mystery and market potential are valuable to enterprises, but they cannot be regarded as intangible assets, and they lack effective tangible proof. Their value is generated with the specific property associated with it, which can be intangible assets or tangible assets.
(3) Intangible assets should be produced or existed within the identifiable time or as the result of identifiable events, and should also be destroyed or terminated as the result of identifiable events within the identifiable time
Like other assets, intangible assets are produced at a certain moment, and may have to be created and developed after a long period of brewing. In this way, it is necessary to provide evidence to prove the emergence of intangible assets, which is often based on its tangible documents. In other words, a state of existence cannot be regarded as an intangible asset if there is no identifiable proof that can prove its production or existence.
just as it comes into being at a specific moment, intangible assets should die on a specific date. Some intangible assets have an exact validity period, then it will die out at the expiration of the validity period; Some intangible assets have no exact expiration date, and it is not clear at the beginning when they will die, but there is no doubt that they will die at a certain moment. Understanding the finiteness of intangible assets' service life is very significant for asset evaluation, and the degree of depreciation and usability should be fully considered when evaluating its value. The limited service life of intangible assets also provides a basis for amortization of intangible assets in accounting.
iii. indication or display of intangible assets
One of the manifestations of intangible assets' economic value is that it can bring measurable economic benefits. This kind of economic benefits can be manifested as increasing income, reducing costs or improving management efficiency. Sometimes it is difficult to quantify this economic benefit, but it must be quantifiable. If direct quantification is not feasible, indirect methods can be adopted, for example, the value of the intangible asset can be measured by comparing the economic benefits generated when the target intangible asset is used with the economic benefits when the intangible asset does not exist. If its value cannot be quantified, neither asset appraisal nor accounting can confirm it. It is necessary to distinguish the economic existence form of intangible assets from its economic value. As a target intangible asset, it is not enough to have only the economic existence form, but it must also have economic value, both of which are indispensable. If an enterprise designs a trademark and registers it, it already has the economic existence form of trademark right, but if the enterprise locks it in a drawer forever and is not prepared to use it for any purpose, it has no economic value, and of course it cannot be used as a target intangible asset.
another manifestation that intangible assets have economic value is that they can potentially increase the value of other assets associated with them. That is to say, if the target intangible asset is added to a portfolio, it can have a positive impact. Intangible assets themselves can produce economic value, such as the income from renting intangible assets; Sometimes, intangible assets need some tangible assets to realize or fully realize their economic value, but no matter which form they are realized, intangible assets are valuable.
the debate in the field of intangible assets is fierce, and the understanding is quite different. In my opinion, as a target intangible asset, it should be necessary to have a legal form of economic existence and quantifiable economic value.