Intangible assets

[Joanne Ng]

Hi everyone, I would like to ask , can a boat builder company capitalised their boat drawing as an intangible assets ?? Thank you in advance.

 

[Fidget]

Intangible means lacking physical substance. So if a drawing exists, it has substance to it since it'll be either on some sort of paper or canvas. Asides from that, the existence of a drawing of a boat isn't likely, on its own, to bring any economic benefit to the company, so it's difficult to see how it could be capitalised in any shape or form.

That said, if the company went on to patent the design and then received money from others wanting to use that design, then there may be an intangible asset because the use allowed of the design which is owned by the company is generating money for the company.

It's not a straightforward thing, but that's the general gist of it.

 

[Joanne Ng]

Intangible means lacking physical substance. So if a drawing exists, it has substance to it since it'll be either on some sort of paper or canvas. Asides from that, the existence of a drawing of a boat isn't likely, on its own, to bring any economic benefit to the company, so it's difficult to see how it could be capitalised in any shape or form.

That said, if the company went on to patent the design and then received money from others wanting to use that design, then there may be an intangible asset because the use allowed of the design which is owned by the company is generating money for the company.

It's not a straightforward thing, but that's the general gist of it.

Hi Fidget, thank you for the comment.
It’s really help.
My boss was saying that the drawing worth a lot money, he can just sell it if somebody want to buy that’s y he want to capitalised. Can we say that this is the future economic benefit that will flow to company in future? Or according to FRS 38, if the five criteria under development cost is met, we can capitalised right?

 

[Fidget]

Wrong. A drawing is not intangible and therefore IAS 38 doesn't apply to it.

If however, it is actually worth a lot of money, then it's possible that it could be capitalised, just not as an intangible asset. Assets that fall into the category of works of art, or even just 'office art' pieces that have been acquired by a company can be capitalised for their value, so it's therefore reasonable that an 'in-house' production can be capitalised as well in much same way as assets constructed by a company for use in the company.

However, the problem you have is placing a value on the drawing. With acquired works, their value is established already. With an in-house drawing, all you've got is your boss's say so, which isn't enough. It would probably take an independent valuer specialising in that type of artwork to estimate how much it could be worth before you could capitalise it.

 

[Joanne Ng]

Hi Fridget, thank you very much for the reply.

This means we can just capitalised as assets but the amount will need a valuer to value.

However, this is one of my concerns also, because we are small company so it is unlikely that my boss will spend the money to do the valuation.

 

[SSM0011]

http://www.willamette.com/pubs/presentations/ncva_valuing_intangibles_feb2009.pdf
I would not suggest neophytes tackling this on their own.