How to put intangible assets on the balance sheet?

On January 1, 2021, a federal standard came into force, which regulates tax and accounting of intangible assets (intangible assets). Some changes were made to the previous procedure, which are indicated in the corresponding instructions of the Ministry of Finance. Recommendations for the implementation of new legal acts are indicated in the system letter of the Ministry of Finance dated November 30, 20.

According to the current Accounting Regulations 14/2007, intangible assets is the company's property if it meets a number of characteristics:

• Intangible assets are devoid of material and material form, that is, the product cannot be touched, however, the company has properly executed documents that confirm the ownership.
• Intangible assets must have a value that can be estimated at a certain amount. For example, if a company ordered the creation of a website, then the price of intangible assets is equal to the total cost of development and technical support.
• The property has useful potential, brings or will further benefit its owner. An example is a corporate website or a mobile application, because it helps a company find new customers.
• A property is considered a tangible asset if it is used repeatedly or regularly for a year or more, and the company does not intend to sell the asset during this period.
• The most important feature of an intangible asset is that the owner has documents that confirm the exclusive or non-exclusive right to dispose of the property.

The most popular types of intangible assets are software products and technologies, trademarks, databases and electronic archives, literary works.

Accounting procedure for intangible assets

Distinguish between the initial and subsequent cost of intangible assets. These are two different values, and the first of them remains unchanged in tax accounting. To estimate the original price, it is necessary to take into account the way which the asset was received. There are four ways in total:

1. Purchase
2. Own development
3. Contribution to the authorized capital
4.  

If the company has acquired intangible assets, then in order to calculate the initial price, all expenses within the transaction must be summed up. This is the amount spent on the purchase of the exclusive right to the asset from its owner, payment for intermediary services, customs and other duties, the cost of preparing for the use of the asset by the company.

If the intangible asset was created at the expense of its own resources, then the cost will include the cost of material, salary of staff and contractors, the cost of maintaining the asset, its insurance and depreciation.

Intangible assets received as a gift must be evaluated by an independent company that provides such services. When introducing intangible assets into the authorized capital of the organization, the initial price will be set by the founder.

For accounting and tax accounting, you also need to establish the life of the asset. The period of useful use when purchasing intangible assets is equal to the duration of the exclusive rights to use the property. If the asset is created using its own resources, then the useful life is equivalent to the life of the asset for predetermined purposes.

If, due to the peculiarities of intangible assets, the service life is undetectable, then it can be set in the range from two to ten years. This indicator is, first of all, important for tax accounting.

The subsequent value of intangible assets may change over the life of the asset, which is reflected in the accounting documents.

In some cases, an independent assessment of the market value of intangible assets may be required. It is necessary if the owner plans to conclude a licensing agreement for the use of the asset or pledges it as collateral for a loan.

On the balance sheet, the accounting for the adoption of intangible assets is displayed in the section "Non-current assets". Account 04 is used for accounting intangible assets, account 05 - for their depreciation.

Accounting for disposal of intangible assets

The useful life of intangible assets is limited, after which they are retired and not recorded on the company's balance sheet. Prior to disposal, the owner has the right to sell, transfer free of charge or contribute the asset to the authorized capital. By these actions, the owner terminates the ownership, so intangible assets can be written off the balance sheet. If an agreement was signed for the use of an asset by another company under a business agreement, then intangible assets are still retained on the balance sheet of the previous owner and depreciation is recorded.

To remove intangible assets from accounting, a special act is drawn up. The company can use its own letterhead for it. The document contains information about the asset and the reason for the write-off, residual value and the amount of depreciation.

Would you like to know more about the nuances of the procedure for stating intangible assets? Sign up for a consultation at a convenient time for you with the specialists of A4 Law firm.