Intangible Assets

Intangible Assets

Identifiable, non-monetary assets that lack physical substance. They are
controlled by the company as a result of past events and from which future
economic benefits are expected to flow.

Future Economic Benefits

It must be probable that the expected future economic benefits (such as increased revenue or
reduced costs) attributable to the asset will flow to the company.

Reliable Measurement

The cost of the asset can be measured reliably. If you cannot determine a credible cost, you
cannot recognize it as an asset.

Identifiability

The asset must be identifiable, meaning it is distinct from the company's goodwill. This criterion is
met if the intangible asset either:
- Is separable: It can be separated or divided from the company and sold, transferred, or
licensed on its own (e.g., selling a software license).
- Arises from contractual or legal rights: It comes from a legal right, such as a patent, a
copyright, or a franchise agreement, regardless of whether those rights are transferable.

Intangible Assets

(200) – Research.
(201) – Development.
(202) – Administrative Concessions.
(203) – Industrial Property.
(204) – Goodwill
(205) – Transfer Rights
(206) – Computer Software

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The PGC establishes a very important general principle for intangible assets: The
valuation rules for Property, Plant, and Equipment (PP&E) also serve as the
baseline for valuing Intangible Assets. This general rule applies unless a more
specific standard for a particular intangible asset exists (such as the specific
rules for research, development, or goodwill).

Determining the amortization period for intangible assets

Under the PGC, intangible assets are generally considered to have a finite useful life. Therefore,
their cost must be systematically allocated over the period in which they are expected to
generate economic benefits for the company.

Reliable Estimate 

The asset is amortized over its estimated useful life—the period it's reasonably
expected to contribute to the company's revenues.

Unreliable Estimate

If the useful life of an intangible asset cannot be reliably estimated, the PGC
establishes a default rule: The asset will be amortized over a period of 10 years. This is a key PGC- specific rule. It applies unless a different period is set by a specific regulation for that type of asset.

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Goodwill

Goodwill is an intangible asset representing the value of a business that isn't directly tied to its identifiable assets. It includes things like a strong brand reputation, a loyal customer base, and good employee relations.
Goodwill cannot be created by a company on its own. It is only recognized on the
balance sheet when one company acquires another in a business combination

Initial Cost

It's the amount paid for a company that is more than the fair value of its
individual assets and liabilities.

GoodWill Formula

Purchase Price - Fair Value of (Assets - Liabilities)

Subsequent Accounting (Spanish PGC Rule)

This is a key difference from international standards (IFRS):
Amortization: Goodwill must be amortized on a straight-line basis. The presumed useful
life, unless proven otherwise, is 10 years.
Impairment Test: In addition to amortization, Goodwill must still be tested for impairment
at least annually.