Intermediate Financial Accounting - Essay Example

International Accounting Standard 38 mentions the utility and usage of intangibles in the financial aspect of companies. The intangible assets are the intellectual property rights, goodwill and the expenditures of the company on research and developments. They are also known as capital developments. In the second part of the report, the examples of two famous listed Australian companies have been taken. Both of these companies are from pharmaceutical industry. Acrux Limited specializes into development of fast-drying sprays and other medicinal products, while Agenix Limited is mainly based in China and has competency in development of biopharmaceuticals.

The company is into several agreements with renowned institutions for development, innovation and discovery of useful medicines for the betterment of mankind. The management in Acrux Limited considers their intangible assets at the cost price when they were acquired. In case of Agenix Limited the capital development of their research and development on some new drug has been included. Agenix Limited has a larger base of intangible assets than Acrux limited, in terms of financial value. Both the financial statement of both the companies shows that the intangible assets of the companies are well-maintained. . The best examples of intangible assets in organizations are the goodwill, intellectual property rights such as patents, copyrights, trademarks, brand recognition, etc.

There are two types of intangible assets, such as legal and competitive intangible assets. The legal intangible assets are the trade secrets such as the patents or copyrights, competitive intangible assets are knowledge or technical know-how. The legal intangible assets are acquired through judicial regulations, but in case of competitive intangibles, legal regulations are not enforceable (Anson, and Drews, 2007, p. 6). The Uniform Commercial Code (Section 9-102 (a) (42)), depicts that intangibles are the personal property.

In International Accounting Standard (IAS) 38, it has been mentioned that the legal intangible assets which are internally developed cannot be defined, but if it is acquired from third-party then it can be recognized. While in case of US GAAP, the intangible assets are segregated into internally developed intangibles versus the purchased ones, and the limited life intangibles versus indefinite life intangibles. The potential economic reimbursement from an intangible asset might comprise of revenue from sale of services or products, saving cost, or additional benefits from the usage of assets by the venture.

For example, using intellectual property in a construction development may condense the future cost of production rather than the increase in future revenues (Australian Accounting Standards Board, 2008, p. 2-4). Problem Areas The power to create customer value, stakeholders and shareholders’ value and economic value no longer depends on the production factors, but on intangible assets. These are also considered as the