What is Intangible Assets Accounting?
An intangible asset is a non-monetary asset without physical substance that is identifiable, controlled by the entity, and expected to generate future economic benefits. Examples include patents, trademarks, licences, software, customer relationships, and capitalised development costs. IAS 38 sets the recognition and measurement rules.
How It Works
- Confirm the asset meets the definition: identifiability, control, and future economic benefits.
- Recognise it at cost on initial acquisition.
- Choose either the cost or revaluation model for subsequent measurement (revaluation rare in practice).
- Amortise assets with finite useful lives over that life; test indefinite-life assets and goodwill for impairment annually.
Saudi Context
Saudi companies capitalise ERP software, brand acquisitions, and franchise licences under IAS 38. The Saudi Authority for Intellectual Property (SAIP) registers patents and trademarks, and these registration fees can be capitalised. ZATCA reviews intangible amortisation for zakat base purposes.
Example
A Jeddah retailer buys a Saudi franchise licence for SAR 1.5 million with a 10-year term. The company recognises SAR 1.5 million intangible asset and amortises SAR 150,000 per year over the licence period.