Both US GAAP (ASC 805, Business Combinations, and ASC 350, Intangibles — Goodwill and Other) and IFRS (IFRS 3(R), Business Combinations, and IAS 38, Intangible Assets) define intangible assets as nonmonetary assets without physical substance. The recognition criteria for both accounting models require that there be probable future economic benefits and costs that can be reliably measured, although some costs are never capitalized as intangible assets (e.g., start-up costs).
Goodwill is recognized only in a business combination in accordance with ASC 805 and IFRS 3(R). With the exception of development costs (addressed below), internally developed intangibles are not recognized as assets under either ASC 350 or IAS 38. Internal costs related to the research phase of research and development are expensed as incurred under both accounting models.
Amortization of intangible assets over their estimated useful lives is required under both US GAAP and IFRS, with one US GAAP exception in ASC 985-20, Software — Costs of Software to be Sold, Leased or Marketed, related to the amortization of computer software sold to others.
In both sets of standards, if there is no foreseeable limit to the period over which an intangible asset is expected to generate net cash inflows to the entity, the useful life is considered to be indefinite and the asset is not amortized. Goodwill is never amortized.
No further convergence is planned at this time.
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