Intangible assets in business
Intangible assets - definition
Pursuant to the provisions of the Accounting Act, intangible assets are defined as property rights acquired by an entity, classified as fixed assets and suitable for economic use. The planned period of their use should exceed one year.
Intangible assets are primarily:
- copyrights, related rights, licenses, concessions,
- rights to inventions, patents, trademarks, utility and decorative models,
- know-how, i.e. the right to use knowledge in an industrial, commercial, scientific or organizational field,
- acquired goodwill,
- Research and development costs.
To sum up, we deal with intangible assets when:
- is likely to be used for more than a year,
- it is intended for the company's own needs or put into use on the basis of rental or lease agreements,
- suitable for economic use.
Intangible assets - initial value
The initial value of intangible assets is determined similarly to the fixed assets. So if they were obtained by:
- purchase for consideration - the initial value is the purchase price,
- own production - the initial value is the production cost,
- receipt free of charge - the initial value is the market value as at the date of purchase, unless the free transfer agreement specifies this value at a lower amount,
- in-kind contribution to a civil law partnership - the initial value is the value on the date of contribution, not higher than the market value.
Intangible assets - depreciation
Intangible assets should not be recognized directly as tax deductible costs, but in the form of depreciation. The first copy should be made in the month following the month in which the CCI was entered in the records. Write-offs can be calculated - in equal amounts - monthly, quarterly or at the end of the tax year.
It is the entrepreneur's responsibility to independently determine what method and rate of depreciation they will use and when they will make write-offs. The lack of imposed rates is a great convenience, thanks to which the entrepreneur can include the depreciation write-offs of intangible assets in the cost policy of his company. The only limitation in this case is the minimum depreciation period specified in the regulations:
- 24 months for licenses (sub-licenses) for computer programs and copyrights,
- 24 months for screening films and broadcasting radio and television programs,
- 12 months from the incurred costs of completed development works,
- 60 months from other intangible assets.
Intangible assets - records
Entrepreneurs who have fixed assets and intangible assets in the company are required to keep appropriate records (one for both assets). The records should include:
- ordinal number,
- date of acquisition,
- date of acceptance for use,
- specification of the document confirming the acquisition,
- determination of intangible and legal value,
- initial value,
- depreciation rate,
- the amount of depreciation.
As a rule, taxpayers settling on the basis of a recorded lump sum do not include tax deductible costs in their settlements. Nevertheless, the possessed fixed assets and intangible assets are required to be recorded and depreciated.
Software - intangible assets
Computer software is used in most modern companies. Therefore, it is important to determine whether it will constitute an intangible asset. In accordance with the Copyright Act i
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Online advice for businessesrelated rights of February 4, 1994, the software may be subject to economic copyrights or licenses. At the same time, it should be remembered that both the acquired copyright and the license must meet the requirements of the provisions - art. 3 sec. 1 point 14 of the Accounting Act.
Intangible assets - improvement
Fixed assets entered into the company's records may be improved. So is it possible to improve intangible assets?
According to the regulations, intangible assets cannot be improved. Expenses that update, modernize, and improve the intangible and legal value, can therefore be considered as a new intangible asset. Therefore, even if the entrepreneur acquires additional property rights while using the CCI, which will increase its parameters, it cannot increase its value.
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Intangible assets - liquidation
Intangible assets that, for various reasons, will no longer be used in the company, should be liquidated (a protocol for the liquidation of intangible assets will be required). If, on the other hand, there is a situation where the taxpayer loses the right to use a specific CIS, it will not be necessary to liquidate it - it will no longer constitute the company's property and it is enough to delete it.
In each case, the taxpayer should remember to include the non-depreciated part of intangible assets as tax deductible costs and to remove it from the records. It is important for the taxpayer to be able to prove that on the date of incurring expenses for the purchase of intangible assets, there was a relationship between the entire value of the cost and income.