Intangible Assets and Goodwill

This chapter describes fair value accounting build from different issues related to intangible assets and goodwill. Intangible assets are assets lacking a physical substance, but that provide future economic benefits, generally in the form of the ability to produce income. Goodwill is often discussed in the same documents as intangible assets since it has many similarities to certain intangibles. But goodwill is considered a separate category of asset, defined as the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed. Research costs associated with intangible assets are to be expensed as incurred under both IFRS and U.S. GAAP. Under U.S. GAAP, intangible assets should be initially recorded at fair value. Given the nature of intangible assets that are capitalized, fair value usually equates to the purchase price of the asset, when purchased from a third party, or an accumulation of development costs, as explained earlier.