When purchasing a patent, a company records intangible assets do not include it in the Patents account at cost. The firm also debits the Patents account for the cost of the first successful defense of the patent in lawsuits (assuming an outside law firm was hired rather than using internal legal staff). Such a lawsuit establishes the validity of the patent and thereby increases its service potential.
Related IFRS Standards
Since brand equity is an intangible asset, as is a company’s intellectual property and goodwill, it cannot be easily accounted for on a company’s financial statements. However, a recognizable brand name can still create significant value for a company. Investing in the quality net sales of the product and a creative marketing plan can have a positive impact on the brand’s equity and the company’s overall viability. “Researchers and practitioners have reached a consensus that intangible assets play a vital role in the success and survival of firms in today’s economy. Suppose that a company does acquire an intangible asset, such as the right to use another company’s customer list for 10 years (a finite period of time i.e. an identifiable lifespan). Intangible assets differ from tangible assets, which have physical forms such as buildings or office furniture.
