INTANGIBLE ASSETS - 8615
An intangible asset possesses all of the following characteristics:
- Lacks physical substance. It may be contained in, on, or associated with an item that has physical substance (e.g., software stored on a compact disc or right-of-way easement associated with the underlying land).
- Is nonfinancial in nature. It is not in monetary form, similar to cash or investment securities; does not represent a claim or right to assets in monetary form, similar to receivables; and is not a prepayment for goods and services.
- Has an initial useful life extending beyond a single reporting period.
- Is
identifiable. It is considered identifiable when it meets either of the
following conditions:
- The asset is separable. The asset can be separated or divided from the department and sold, transferred, licensed, rented, or exchanged individually or together with a related contract, asset, or liability.
- The asset arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the department or from other rights and obligations.
Departments will record intangible assets at cost. Intangible asset costs may include the purchase price, development costs associated with internally generated intangible assets, legal fees, and other costs incurred to obtain title to the asset. For information on internally generated intangible assets, see SAM Section 8615.3.
Departments will capitalize intangible assets that meet the capitalization threshold in SAM Section 8602. Departments do not amortize intangible assets with indefinite useful lives.
The following types of intangible assets are excluded from this policy:
- Intangible assets acquired or created primarily to obtain income or profit. Departments will record these assets as investments.
- Assets resulting from capital lease transactions reported by lessees. For information on right-to-use lease assets and subscription-based information technology arrangements, see SAM Sections 8615.4 and 8615.5.
- Goodwill created through the combination of another entity and a state department.
For the recording of various intangible asset types, see SAM Sections 8615.1 through 8615.5. Departments will record patents, copyrights, trademarks, and other intangible assets that are not included in these sections in the following accounts:
- Account No. 1620600, Patents, Copyrights and Trademarks - Amortizable
- Account No. 1625600, Patents, Copyrights and Trademarks - Non-Amortizable
- Account No. 1620900, Other Intangible Assets - Amortizable
- Account No. 1625900, Other Intangible Assets - Non-Amortizable