Can someone please tell me if companies are allowed to capitalize intangibles like value of their facebook fanpages and twitter accounts in their Balance sheets? Like a customer list? If yes, can this trick be used to manipulate financial accounts? Thank you!
Capitalizing value of a Fanpage in the Balance sheet?
- Thread starter Budhardt
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S2000magician
New member
- Mar 17, 2013
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I doubt it. They’re not allowed to capitalize internally generated patents or trademarks, for example, so I’d be quite surprised if they could capitalize Facebook or Twitter accounts.
Examples of intangible assets
Recognition criteria. IAS 38 requires an entity to recognise an intangible asset, whether purchased or self-created (at cost) if, and only if:
[IAS 38.21]it is probable that the future economic benefits that are attributable to the asset will flow to the entity; andthe cost of the asset can be measured reliably.This requirement applies whether an intangible asset is acquired externally or generated internally.
[IAS 38.33]If recognition criteria not met. If an intangible item does not meet both the definition of and the criteria for recognition as an intangible asset, IAS 38 requires the expenditure on this item to be recognised as an expense when it is incurred. [IAS 38.68]
I hope this helps.
More explaination can be found here:
http://www.iasplus.com/en/standards/ias/ias38
- patented technology, computer software, databases and trade secrets
- Examples of intangible assets
- patented technology, computer software, databases and trade secrets
- trademarks, trade dress, newspaper mastheads, internet domains
- video and audiovisual material (e.g. motion pictures, television programmes)
- customer lists
- video and audiovisual material (e.g. motion pictures, television programmes)
- customer lists
- mortgage servicing rights
- licensing, royalty and standstill agreements
- import quotas
- franchise agreements
- customer and supplier relationships (including customer lists)
- marketing rights
Examples of intangible assets- patented technology, computer software, databases and trade secrets
- trademarks, trade dress, newspaper mastheads, internet domains
- video and audiovisual material (e.g. motion pictures, television programmes)
- customer lists
- Examortgage servicing rights
- licensing, royalty and standstill agreements
Examples of intangible assets- patented technology, computer software, databases and trade secrets
- trademarks, trade dress, newspaper mastheads, internet domains
- video and audiovisual material (e.g. motion pictures, television programmes)
- customer lists
- mortgage servicing rights
- licensing, royalty and standstill agreements
- import quotas
- franchise agreements
- customer and supplier relationships (including customer lists)
- marketing rights
- import quotas
- franch
Recognition criteria. IAS 38 requires an entity to recognise an intangible asset, whether purchased or self-created (at cost) if, and only if:
[IAS 38.21]it is probable that the future economic benefits that are attributable to the asset will flow to the entity; andthe cost of the asset can be measured reliably.This requirement applies whether an intangible asset is acquired externally or generated internally.
[IAS 38.33]If recognition criteria not met. If an intangible item does not meet both the definition of and the criteria for recognition as an intangible asset, IAS 38 requires the expenditure on this item to be recognised as an expense when it is incurred. [IAS 38.68]
I hope this helps.
More explaination can be found here:
http://www.iasplus.com/en/standards/ias/ias38
1BigStudMuffin
New member
- Jun 8, 2012
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i thought you could capitalize R&D once it reachese technological feasibility kids.
You could possibly capitalize the fanpage if the costs attributable to specifically developing it were traceable, and if you could prove that it generated cash flows for the company - i.e. would have to actually be able to take orders. A plain vanilla fanpage would be prohibited from being capitalized.
Wow! so many surreptious ways to increase assets and cashflows! Rob Bowie did once and infact this example was a big time highlight in our CFAI level II itself. From the limited knowledge that I posses, following are noteworthy :
1. Assets need capitalisation whether tangible or intangible and capitalisation needs FINITE life. So first challenge is to attach a finite life to the fanbook page ( provided the website does not shut down on it’s own or the host decides otherwise)
2. Anything that is intangible and a finite life cannot be attached to the same, it needs to be expensed immediately ( if internally generated) or checked for periodic impairment at least annually. Both IAS and GAAP agree on the same.
3. Cetain items ( R& D, S/W. Develpment..I can’t recall the entire list) have rule based treatment e.g. fully expense, partially expense, expense upto a certain point and then capitalise blah blah
4. Internet Domain happens to be a intangible asset ( the cost of which can be reasonably and reliably established… NOT THE VALUE) and thus in the context a fanpage comes nearest to this asset type. The interesting thing is if the fanpage is an internally generated asset then the cost of holding such fanpage vis-a vis the benefits that may accrue is abysmally low and I don’t see how it really can benefit anyway.. might as well expense the same. However if the fanpage is acquired from an external source then it is the VALUE now that needs amortisation and thus would make sense ( Hola! FACEBOOK IS SO CASHRICH!!!) So IAS (38.21 & 38.33) can be satisfied with a fanpage concept (provided nobody argues that the Intenet domain is hosted by a 3rd party and hence it is really not internally generated!)
However, magician is invited to put in a few more views if felt so.
1. Assets need capitalisation whether tangible or intangible and capitalisation needs FINITE life. So first challenge is to attach a finite life to the fanbook page ( provided the website does not shut down on it’s own or the host decides otherwise)
2. Anything that is intangible and a finite life cannot be attached to the same, it needs to be expensed immediately ( if internally generated) or checked for periodic impairment at least annually. Both IAS and GAAP agree on the same.
3. Cetain items ( R& D, S/W. Develpment..I can’t recall the entire list) have rule based treatment e.g. fully expense, partially expense, expense upto a certain point and then capitalise blah blah
4. Internet Domain happens to be a intangible asset ( the cost of which can be reasonably and reliably established… NOT THE VALUE) and thus in the context a fanpage comes nearest to this asset type. The interesting thing is if the fanpage is an internally generated asset then the cost of holding such fanpage vis-a vis the benefits that may accrue is abysmally low and I don’t see how it really can benefit anyway.. might as well expense the same. However if the fanpage is acquired from an external source then it is the VALUE now that needs amortisation and thus would make sense ( Hola! FACEBOOK IS SO CASHRICH!!!) So IAS (38.21 & 38.33) can be satisfied with a fanpage concept (provided nobody argues that the Intenet domain is hosted by a 3rd party and hence it is really not internally generated!)
However, magician is invited to put in a few more views if felt so.