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Wyatt, Anne --- "An Accounting Perspective" [2006] ELECD 346; in Bosworth, Derek; Webster, Elizabeth (eds), "The Management of Intellectual Property" (Edward Elgar Publishing, 2006)

Book Title: The Management of Intellectual Property

Editor(s): Bosworth, Derek; Webster, Elizabeth

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845421120

Section: Chapter 3

Section Title: An Accounting Perspective

Author(s): Wyatt, Anne

Number of pages: 26

Extract:

3. An accounting perspective
Anne Wyatt

1 THE ACCOUNTING DEFINITION

Intangible capital (IC) and intellectual property (IP) are not specifically
defined in accounting regulations. Instead, as productive resources (or
inputs), the individual components of IC and IP are reported as assets on
the balance sheet if the asset definition and the asset recognition rules in
the accounting regulations are satisfied. Definition and recognition rules
in the accounting regulations are applied in a two-stage process. We first
apply the definition rules and, if these are satisfied, the second stage is to
then apply the recognition rules. Satisfying the `definition' rules means the
item has attributes that fit the definition criteria. Satisfying the `recognition'
rules means that this item meets the recognition rules and can therefore
be recorded in the financial statements ­ one or more of the profit and
loss statement, balance sheet, and cash flow statement. The alternative
to recognition is disclosure. `Disclosure' means that either quantitative
or qualitative information about the item is included in the explanatory
notes to the financial statements. However, the item is not recorded in the
accounting system or reported in the financial statements.

1.1 Definition

According to the International Accounting Standards Board (IASB),1 in
their Framework for the Preparation and Presentation of Financial Statements
(the Framework), an asset is defined as `a resource controlled by the entity as
a result of past events and from which future economic benefits are expected
to flow to the entity' (IASB 2001, para. 49(a)). Most ...