Chapter 4 — Subsequent Accounting for Intangible Assets

4.1 Overall Accounting for Intangible Assets

ASC 350-30

05-1 This Subtopic addresses financial accounting and reporting for intangible assets (other than goodwill) acquired individually or with a group of other assets and for the cost of developing, maintaining, or restoring internally generated intangible assets. However, it does not discuss the recognition and initial measurement of intangible assets acquired in a business combination or in an acquisition by a not-for-profit entity. This Subtopic also addresses financial accounting and reporting for intangible assets after their acquisition, including intangible assets acquired in a business combination or an acquisition by a not-for-profit entity.

Pending Content (Transition Guidance: ASC 805-60-65-1)

05-1This Subtopic addresses financial accounting and reporting for intangible assets (other than goodwill) acquired individually or with a group of other assets and for the cost of developing, maintaining, or restoring internally generated intangible assets. However, it does not discuss the recognition and initial measurement of intangible assets acquired in a business combination, acquired in an acquisition by a not-for-profit entity, or recognized by a joint venture upon formation. This Subtopic also addresses financial accounting and reporting for intangible assets after their acquisition, including intangible assets acquired in a business combination, in an acquisition by a not-for-profit entity, or by a joint venture upon formation.

Pending Content (Transition Guidance: ASC 805-60-65-1)

05-2 Guidance on the initial recognition and measurement of intangible assets acquired in a business combination or in an acquisition by a not-for-profit entity is provided in Subtopics 805-20 and 958-805, respectively. Guidance on the initial recognition and measurement of intangible assets by a joint venture upon formation is provided in Subtopic 805-60.

05-3 Intangible assets acquired individually or with a group of other assets should be recognized as assets in accordance with Section 350-30-25. Costs of developing internally generated intangible assets should be accounted for in accordance with paragraph 350-30-25-3.

05-4 The accounting for an intangible asset after acquisition depends on its useful life. If that life is indefinite, the intangible asset should not be amortized but should be tested for impairment at least annually in accordance with paragraphs 350-30-35-15 through 35-20. If that life is finite, the intangible asset should be amortized in accordance with paragraphs 350-30-35-6 through 35-13 and tested for impairment under the guidance for long-lived assets in Subtopic 360-10.

05-5 This Subtopic also includes guidance on the presentation of intangible assets in the balance sheet, presentation of amortization expense and impairment losses for intangible assets in the income statement, and disclosure of information on intangible assets in the notes to financial statements.

This chapter addresses the accounting for intangible assets other than goodwill after their initial recognition. Although goodwill is an intangible asset, the meaning of the term “intangible assets” in this chapter is the same as in the ASC master glossary, which defines intangible assets as “assets (not including financial assets) that lack physical substance” and indicates that the term “is used to refer to intangible assets other than goodwill.”

Intangible assets are initially recognized on an entity’s balance sheet in the following ways:

In a transaction accounted for as an asset acquisition (see Section 4.1.2).
In a transaction accounted for as a business combination, upon the formation of a joint venture (once an entity adopts the guidance in ASU 2023-05), or in an acquisition by an NFP. Further, the recognition and measurement principles used for business combinations are also applied in the separate financial statements of an entity that has elected to apply pushdown accounting or an entity that adopts fresh-start reporting. (see Section 4.1.3).

Once an intangible asset is recognized, its useful life to the entity must be determined. The useful life of an intangible asset is either finite or indefinite. A finite-lived intangible asset is subject to amortization over its useful life to the entity and is subject to impairment testing when a triggering event occurs in accordance with ASC 360-10. By contrast, an indefinite-lived intangible asset is not subject to amortization and is subject to impairment testing at least annually in accordance with ASC 350-30. The decision tree below outlines the accounting for intangible assets after initial recognition.

4.1.1 Scope

ASC 350-30

15-1 This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 350-10-15, with specific transaction qualifications noted below.

15-2 While goodwill is an intangible asset, the term intangible asset is used in this Subtopic to refer to an intangible asset other than goodwill.

15-3 The guidance in this Subtopic applies to the following:

Intangible assets acquired individually or with a group of other assets (but not the recognition and initial measurement of those acquired in a business combination or an acquisition by a not-for-profit entity)
Intangible assets (other than goodwill) that an entity recognizes in accordance with Subtopic 805-20 or 958-805 after they have been initially recognized and measured, except for those identified in the following paragraph
Subparagraph not used.
Costs of internally developing identifiable intangible assets that an entity recognizes as assets.

The disclosure requirements of paragraphs 350-30-50-1 through 50-3 also apply to capitalized software costs.

Pending Content (Transition Guidance: ASC 805-60-65-1)

15-3 The guidance in this Subtopic applies to the following:

Intangible assets acquired individually or with a group of other assets (but not the recognition and initial measurement of those acquired in a business combination, acquired in an acquisition by a not-for-profit entity, or recognized by a joint venture upon formation)
Intangible assets (other than goodwill) that an entity recognizes in accordance with Subtopic 805-20, 805-60, or 958-805 after they have been initially recognized and measured, except for those identified in paragraph 350-30-15-4
Subparagraph not used.
Costs of internally developing identifiable intangible assets that an entity recognizes as assets.

The disclosure requirements of paragraphs 350-30-50-1 through 50-3 also apply to capitalized software costs.

15-4 The guidance in this Subtopic does not apply to the following:

Subparagraph not used.
Subparagraph superseded by Accounting Standards Update No. 2010-07.
Except for certain disclosure requirements as noted in the preceding paragraph, capitalized software costs
Intangible assets recognized for acquired insurance contracts under the requirements of Subtopic 944-805.

Pending Content (Transition Guidance: ASC 944-40-65-2)

15-4 The guidance in this Subtopic does not apply to the following:

Subparagraph not used.
Subparagraph superseded by Accounting Standards Update No. 2010-07.
Except for certain disclosure requirements as noted in paragraph 350-30-15-3, capitalized software costs
Except for disclosures required by paragraph 944-805-50-1 (however, an insurance entity need not duplicate disclosures that also are required by paragraphs 944-30-50-2A through 50-2B), intangible assets recognized for acquired insurance contracts under the requirements of Subtopic 944-805.

Pending Content (Transition Guidance: ASC 350-60-65-1)

15-4 The guidance in this Subtopic does not apply to the following:

Subparagraph not used.
Subparagraph superseded by Accounting Standards Update No. 2010-07.
Except for certain disclosure requirements as noted in paragraph 350-30-15-3, capitalized software costs
Except for disclosures required by paragraph 944-805-50-1 (however, an insurance entity need not duplicate disclosures that also are required by paragraphs 944-30-50-2A through 50-2B), intangible assets recognized for acquired insurance contracts under the requirements of Subtopic 944-805
Crypto assets accounted for in accordance with Subtopic 350-60, except for recognition and initial measurement of crypto assets.

Other Considerations

15-5 This Subtopic does not address the identification of market participants, market participant assumptions, or valuation issues associated with defensive intangible assets.

The guidance in ASC 350-30 applies to all entities, including mutual entities and NFPs.

4.1.2 Intangible Assets Recognized and Measured in Accordance With ASC 805-50

ASC 350-30

25-1 An intangible asset that is acquired either individually or with a group of other assets shall be recognized.

25-2 As indicated in paragraph 805-50-30-3, the cost of a group of assets acquired in a transaction other than a business combination or an acquisition by a not-for-profit entity shall be allocated to the individual assets acquired based on their relative fair values and shall not give rise to goodwill.

Pending Content (Transition Guidance: ASC 805-60-65-1)

25-2 As indicated in paragraph 805-50-30-3, the cost of a group of assets acquired in a transaction other than a business combination, an acquisition by a not-for-profit entity, or a joint venture formation shall be allocated to the individual assets acquired based on their relative fair values and shall not give rise to goodwill.

25-4 Intangible assets that are acquired individually or with a group of assets in a transaction other than a business combination or an acquisition by a not-for-profit entity may meet asset recognition criteria in FASB Concepts Statement No. 5, Recognition and Measurement in Financial Statements of Business Enterprises, even though they do not meet either the contractual-legal criterion or the separability criterion (for example, specially-trained employees or a unique manufacturing process related to an acquired manufacturing plant). Such transactions commonly are bargained exchange transactions that are conducted at arm’s length, which provides reliable evidence about the existence and fair value of those assets. Thus, those assets shall be recognized as intangible assets.

Pending Content (Transition Guidance: ASC 805-60-65-1)

25-4 Intangible assets that are acquired individually or with a group of assets in a transaction other than a business combination, an acquisition by a not-for-profit entity, or a joint venture upon formation may meet asset recognition criteria in FASB Concepts Statement No. 5, Recognition and Measurement in Financial Statements of Business Enterprises, even though they do not meet either the contractual-legal criterion or the separability criterion (for example, specially-trained employees or a unique manufacturing process related to an acquired manufacturing plant). Such transactions commonly are bargained exchange transactions that are conducted at arm’s length, which provides reliable evidence about the existence and fair value of those assets. Thus, those assets shall be recognized as intangible assets.

Pending Content (Transition Guidance: ASC 105-10-65-9)

25-4 Intangible assets that are acquired individually or with a group of assets in a transaction other than a business combination, an acquisition by a not-for-profit entity, or a joint venture upon formation may qualify for recognition even though they do not meet either the contractual-legal criterion or the separability criterion for being an identifiable asset (for example, specially-trained employees or a unique manufacturing process related to an acquired manufacturing plant). Such transactions commonly are bargained exchange transactions that are conducted at arm’s length, which provides reliable evidence about the existence and fair value of those assets. Thus, those assets shall be recognized as intangible assets.

30-1 An intangible asset that is acquired either individually or with a group of other assets (but not those acquired in a business combination) shall be initially measured based on the guidance included in paragraphs 805-50-15-3 and 805-50-30-1 through 30-4.

An intangible asset that is acquired either individually or with a group of other assets in an asset acquisition (i.e., a transaction that is not a business combination, an acquisition by an NFP, or a joint venture formation [after the adoption of ASU 2023-05]) is initially recognized and measured in accordance with ASC 805-50. As indicated in ASC 350-30-25-2, the cost of the acquisition generally is “allocated to the individual assets acquired based on their relative fair values.” See Appendix C of Deloitte’s Roadmap Business Combinations for more information about the initial recognition and measurement of intangible assets acquired in an asset acquisition. Also, as discussed in Section C.3.4 of that Roadmap, with the exception of in-process research and development (IPR&D), there is a lower threshold for recognizing intangible assets in an asset acquisition than in a business combination.

4.1.3 Intangible Assets Recognized and Measured in Accordance With ASC 805-20

ASC 350-30

Pending Content (Transition Guidance: ASC 805-60-65-1)

An intangible asset acquired in a business combination is initially recognized and measured in accordance with ASC 805-20. To qualify for recognition in a business combination, an intangible asset must be “identifiable.” That is, the asset must arise from contractual rights or be separable from the entity. Thus, the threshold for recognition is higher in a business combination than in an asset acquisition. Intangible assets acquired in a business combination are generally measured at fair value, with limited exceptions. See Section 4.10 of Deloitte’s Roadmap Business Combinations for more information.

An intangible asset acquired by an NFP is also subject to the recognition and measurement requirements in ASC 805-20. However, ASC 958-805 includes certain additional exceptions to the recognition principle in ASC 805-20 that specifically apply to NFPs. ASC 958-805-25-21 through 25-26 discuss three such exceptions: donor relationships, collections, and conditional promises to give.

Changing Lanes

In August 2023, the FASB issued ASU 2023-05, under which an entity that qualifies as either a joint venture or a corporate joint venture, as defined in the ASC master glossary, is required to apply a new basis of accounting upon the formation of the joint venture. Specifically, the ASU stipulates that a joint venture or a corporate joint venture (collectively, “joint ventures”) must initially measure its assets and liabilities at fair value on the formation date. The amendments in ASU 2023-05 apply to the formation of all joint ventures.

Upon adoption of ASU 2023-05, a joint venture (regardless of whether it meets the definition of a business in ASC 805-10) is required to apply ASC 805-20 in measuring its identifiable assets and liabilities recognized as of the formation date, including its intangible assets.

An entity may also recognize intangible assets in its separate financial statements by applying pushdown accounting in accordance with ASC 805-50 (see Appendix A of Deloitte’s Roadmap Business Combinations) or when adopting fresh-start reporting in accordance with ASC 852. The initial accounting for such intangible assets is also subject to the recognition and measurement requirements in ASC 805-20 that apply to business combinations.

4.1.4 Internally Generated Intangible Assets

ASC 350-30

25-3 Costs of internally developing, maintaining, or restoring intangible assets that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business or nonprofit activity and related to an entity as a whole, shall be recognized as an expense when incurred.

Unless capitalization is specifically permitted under U.S. GAAP (e.g., capitalization of certain costs incurred to develop internal-use software in accordance with ASC 350-40), the costs of internally developing intangible assets should be expensed as incurred.

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This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.