Canada Technologies intangible acquired through an acquisition - capitalization of later enhancement costs

Jul 30, 2021
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Hi everyone,

My company (A) acquired an esport company (B) and through the PPA, we recognized an intangible for their Streaming platform. B was already generating revenues from this platform.

Company A will use the platform as a basepoint, but will incur a lot of labor cost to enhance the platform and bring it where A wants it to be.

If it was an internally developped intangible, it would still be in the development stage, therefore A could capitalize those labor cost.

In this case, since it's a intangible acquired in a acquisition, it tricker. We could say that:

i) we acquired a R&D project through the acquisition and we are still in development (therefore could capitalize the labor cost).
--> but since the plateform is already generating revenue, can we really say it is still development for A whereas it was already use to generate revenue by B?

ii) We acquired a plateform through the acquisition and we are doing enhacement to it, that will bring additionnal economic value to it.
-->In this case it would be capitalizable for internally developped software, but since it was acquired through an acquisition, I'm not sure if still applicable.

I'd like your input on this !!

thanks guys and girls !
Aug 10, 2020
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United States
R&D isn't capitalizable unless it takes the form of depreciable physical assets or goodwill that was part of the acquisition. And in the case of the former, those assets need to have a future useful purpose.

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