Accounting standard setters are taking the issue of brand recognition seriously

Abstract

Companies come to own intangible assets, such as brands, either through developing them themselves — internally developed intangible assets — or through buying another company that owns them — purchased intangible assets. Similarly, companies possess goodwill either through developing it themselves alongside their business — internally generated goodwill — or through acquiring another company and paying for its goodwill — purchased goodwill. The UK's accounting standard setting body, the Accounting Standards Board (ASB), has recently issued a new standard, FRS 10, that revises its requirements for the accounting treatment of purchased intangible assets and purchased goodwill with the result that they will now both be seen in the balance sheets of acquisitive companies. Internally developed intangible assets, except in very specific circumstances, and internally generated goodwill in all circumstances will continue to be prohibited from being recognised.