Advantages Of Intangible Assets

1206 Words 5 Pages
Intangible assets are extremely valuable economic resources for many business enterprises. They are also playing an important role in many business transactions of entities (Statement of financial accounting standards, 2001). The dubious question of intangible assets accounting has been discussed a lot for a long period of time. The only intangible assets that are recorded in the balance sheet are those, which an entity incurs a cost when purchasing them. Therefore, other non-physical assets obtained without a cost are not added into a balance sheet (Meigs, 1999). Intangible assets produced inside the company are those assets which are generated by the entity by being engaged into the two steps of research and development process. Among internally …show more content…
Eventually, it may be said that there are more disadvantages of entering self-generated immaterial assets into the financial statements than advantages. Even though there are arguments, which support the fact that self-generated intangible assets would be better to be included in the financial recordings, they can not outweigh the disadvantages of entering them into balance sheets of an entity. The most convincing arguments for the entering intangible assets, which were self-created by a company to it’s financial statements is the fact that not including such immaterial assets as highly-skilled labor (intellectual capital) may lead to a negative consequences. For instance, investor may undervalue the real value of a firm when deciding whether to spend his money in it or not. On the other hand, among the most convincing arguments against recognizing intangibles are, as mentioned above, problems with assessing the real value of intellectual and other capital and the fact that recordering intangible assets, such as highly skilled labor, etc. will not influence the success of company’s financial reporting. Finally, According to Skinner, 2008 it is hard to identify how accounting rules and standards could be adjusted in a way they allow self-generated intangible assets to be recognized and recorded assets without adapting the overall accounting model in relevant

Related Documents

Related Topics