Capitalising Intellectual Property


I have a client who is keen to capitalise their patent costs. Previously we have always expensed patent costs but they have requested that it is capitalised going forward. The accounts are prepared under FRS102 and so I am assuming that I treat it as an intangible asset and then depreciate it over the life of the patent (20 years) but it doesn't seem like a very accurate way of reflecting its value (but how you decide on a value seems very tricky!)

Any advice as to how I should treat this would be gratefully received!

Many thanks


  • CeeJaySix
    CeeJaySix Registered Posts: 645
    s18 of FRS 102 will not take you too long to read.

    I assume the costs to be capitalised aren't simply the costs of getting the patent, but the underlying costs of developing whatever has been patented? Assuming these are internally generated assets, beware the split between 'research' (must expense) and 'development' (may capitalise - but if you choose to do so that must then be applied to all assets that meet the criteria going forwards).

    I'm not sure why deciding a value would be tricky - initial recognition is at cost, and unless you can measure this reliably you cannot capitalise. Subsequent fair valuing is permitted (not required) but only where there is an active market, which can rarely be shown to exist for unique items.

    Just because the patent lasts 20yrs doesn't mean the useful economic life is 20yrs - this is what you must consider when deciding on an amortisation period, and it must be a 'reliable' estimate to be considered more than 10yrs.
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