Explanation of Accounting Standards for Small Businesses: Intangible Assets
Original Article 40 of the Standards Article 40 Expenditures incurred by small businesses to develop intangible assets by themselves can only be recognized as intangible assets if the following conditions are met at the same time:
(1) It is technically feasible to complete the intangible asset so that it can be used or sold;
(2) There is the intention to complete the intangible asset and use or sell it;
(3) It can be proved that there is a market for the products produced using the intangible assets or that the intangible assets themselves have a market. If the intangible assets will be used internally, their usefulness should be proved;
( 4) Have sufficient technical, financial and other resource support to complete the development of the intangible asset, and have the ability to use or sell the intangible asset;
(5) Belong to the development stage of the intangible asset Expenditures can be measured reliably.
Interpretation of this article is about the conditions for the capitalization of expenditures during the development stage of self-research and development of intangible assets.
Small businesses’ own research and development of intangible assets is an important way to obtain intangible assets, which reflects the core competitiveness and R&D capabilities of small businesses.
Related links Article 66 of the Implementation Regulations of the Enterprise Income Tax Law stipulates: (2) For self-developed intangible assets, the expenditure incurred during the development process after the asset meets the capitalization conditions and before it reaches its intended use as the basis for tax calculation. ?
In order to simplify the accounting of small businesses and reduce the burden of tax adjustments on small businesses, the provisions of this article are consistent with the Enterprise Income Tax Law.
Expenditures incurred by small businesses to develop intangible assets by themselves must meet the five conditions stipulated in this article before they can be capitalized and recognized as intangible assets. Each one is indispensable.
1. The connotation of technical feasibility of completing the intangible asset so that it can be used or sold
This condition is essentially about the technical feasibility of self-developed intangible assets requirements.
To determine whether the development of intangible assets is technically feasible, it should be based on the results at the current stage, and relevant evidence and materials should be provided to prove that the technical conditions required for development by small businesses have been met. There are no technical obstacles or other uncertainties. For example, a small business has completed all planning, design and testing activities, which are necessary activities to enable the intangible assets to achieve the functions, features and technologies in the design plan or have been evaluated by experts, etc.
2. The connotation of having the intention to complete the intangible assets and use or sell them
This condition is essentially a requirement regarding the management intention of an enterprise that develops intangible assets on its own.
The intention of small businesses to develop intangible assets on their own is nothing more than two purposes, one is for self-use, and the other is to sell to external parties.
When a small business develops a certain product or patented technology, it is usually determined based on the purpose or intention of the company's management for the R&D activity. In other words, after the results of a research and development project are achieved, whether to obtain economic benefits through its own use or through external sales should be based on the decision of the company's management. Therefore, the management of a small enterprise should clearly indicate its purpose of developing intangible assets and the possibility of completing the development of the intangible assets so that they can be used or sold.
3. If it can be proven that there is a market for the products produced using the intangible assets or that the intangible assets themselves have a market, and if the intangible assets will be used internally, their usefulness should be proven
This One condition is essentially a requirement regarding the economics or usefulness of self-developed intangible assets.
The purpose of small businesses developing intangible assets on their own is to achieve economic benefits. There are three main ways to achieve this: First, they are used to produce products, and the final realization is realized by using the intangible assets to produce products and selling the produced products. Economic benefits; the second is sale, which is to realize economic benefits by directly selling the developed intangible assets to external parties; the third is self-use, rather than directly used to produce products. The most common feature of the first two methods is that they ultimately need to be completed with the help of the market.
If the relevant intangible assets are used to form new products or new processes after development, the small enterprise should estimate the market situation of the products produced using the intangible assets and should be able to prove that there is a market for the products produced. Can bring an inflow of economic benefits; if the relevant intangible assets are developed for external sale later, the small business should be able to prove that there is a demand for such intangible assets in the market, and there is an external market that can be sold and brought in after development. Inflow of economic benefits; if the intangible assets are not used to produce products or sell externally after development, but are used internally by the small business, the small business should be able to prove its usefulness to the small business when used internally.
IV. The connotation of having sufficient technical, financial and other resource support to complete the development of the intangible asset and the ability to use or sell the intangible asset
This condition In essence, it is about the requirements for the support of resources related to self-development of intangible assets. Specifically include the following:
(1) It is technically reliable to complete the development of the intangible assets
The technical reliability of developing the intangible assets and making them into results is Key to continued development activities. Therefore, there must be conclusive evidence that the small business has sufficient technical support and technical capabilities to continue to develop the intangible asset.
(2) Financial resources and other resource support
Financial resources and other resource support are the economic basis for completing the development of the intangible assets. Therefore, small businesses must be able to explain that they have completed the development of the intangible assets. Whether the financial and other resources required for the development of the intangible asset, such as funds, professional and technical personnel, laboratories, test sites, etc., are sufficient to support the completion of the development of the intangible asset.
Small businesses should demonstrate their ability to obtain the technical, financial and other resources needed in the development process, as well as their plans to obtain these resources. For example, when a small business's own funds are insufficient to provide support, whether there is financial support from other sources, such as a statement from a bank or venture capital fund that is willing to provide the necessary funds for the development of the intangible asset, can be confirmed.
(3) The ability to use or sell the intangible assets to obtain economic benefits
This requirement essentially reflects the control of the small business over the developed intangible assets.
5. The connotation that the expenditures attributable to the development stage of the intangible assets can be measured reliably
This condition is essentially a requirement for the measurability of the cost of self-developed intangible assets.
Expenditures incurred by small businesses on research and development activities should be separately accounted for, such as employee salaries, material fees, etc. incurred by research and development personnel. If the development expenditures incurred are used to support multiple development activities at the same time, they should be accounted separately. Allocate among various development activities according to certain standards, and if it cannot be reasonably allocated, it should be expensed and included in the current profit and loss (administrative expenses), and not included in the cost of intangible assets.
Accounting subjects involved in this article: Small businesses should set up accounting subjects such as "4301 R&D expenditures" in accordance with the provisions of this article and based on their own actual conditions.
Examples of the application of this article
Example 2-37 On March 1, 2013, Company A independently researched and developed a patented technology, and incurred a material cost of 400,000 yuan and labor during the research and development process. The salary is 100,000 yuan, and bank deposits are used to pay other expenses of 300,000 yuan, totaling 800,000 yuan, of which 500,000 yuan is eligible for capitalization. At the end of the year, the patented technology reached its intended use. Assume relevant taxes are not considered.
Company A should prepare the following accounting entries:
(1) When relevant expenses are incurred:
Debit: R&D expenditure? Expenditure 300,000
? Capitalization Expenditure 500,000
Loan: raw materials 400,000
Employee compensation payable 100,000
Bank deposit 300,000
(2) The development project reached its intended use at the end of the year Formation of intangible assets:
Debit: administrative expenses 300,000
Intangible assets 500,000
Credit: R&D expenditure? Expenditure 300,000
?Capitalized expenditure 500,000
Original Article 41 of the Standards: Intangible assets shall be amortized using the straight-line method over their useful lives, and included in the cost of relevant assets or current profits and losses according to their beneficiary objects.
The amortization period of an intangible asset begins when it becomes available for use and ends when it ceases to be used or sold. If the useful life is stipulated in relevant laws or contracts, it can be amortized in installments according to the stipulated or agreed useful life.
If a small enterprise cannot reliably estimate the useful life of intangible assets, the amortization period shall not be less than 10 years.
Interpretation of this article is about the accounting treatment of amortization of intangible assets.
The purpose of small businesses holding intangible assets is to achieve economic benefits, mainly for their own use, but of course they can also be sold to external parties. Self-use involves the amortization of intangible assets.
Related links Article 67 of the Implementation Regulations of the Enterprise Income Tax Law stipulates: The amortization expenses of intangible assets calculated according to the straight-line method are allowed to be deducted. The amortization period of intangible assets shall not be less than 10 years. As an investment or transferred intangible asset, if the useful life is stipulated in relevant laws or contracts, it may be amortized in installments according to the prescribed or agreed useful life. ?
In order to simplify the accounting of small businesses and reduce the burden of tax adjustments on small businesses, the provisions of this article are consistent with the Enterprise Income Tax Law. The main differences with the Accounting Standards for Business Enterprises: First, in the classification of intangible assets, there is no distinction between intangible assets with limited useful lives and intangible assets with uncertain useful lives; second, it stipulates that intangible assets whose useful lives cannot be reasonably estimated shall be classified as no less than 10 Amortization over the period of years; third, it is uniformly required to use the straight-line method for amortization, and other amortization methods such as the output method are not allowed.
1. Basic requirements and methods for amortization of intangible assets
1. All intangible assets should be amortized.
2. There is only one amortization method for intangible assets: the straight-line method, also known as the straight-line method. The main consideration is that this method is simple to calculate and convenient for practical operation of small businesses. For details on the specific application of the averaging method, please refer to the interpretation of Article 30 of these Standards and will not be repeated in this article.
3. The amortization of intangible assets shall be included in the cost of relevant assets or current profits and losses according to the beneficiary objects of the intangible assets. Specifically, it can be divided into five situations: if an intangible asset is used to produce a product, its amortization should be included in the cost of the product; if it is used in daily administrative management, its amortization should be included in the cost of the product; Management expenses; if used for marketing activities, its amortization should be included in sales expenses; if used to develop a new technology, its amortization should be included in the development expenditure of the new technology; if used to build a certain If a fixed asset is a fixed asset, its amortization shall be included in the cost of the construction in progress of the fixed asset.
4. The residual value of intangible assets is usually zero, therefore, the amortization amount of intangible assets is its cost. At this point, unlike fixed assets, fixed assets typically retain a projected net salvage value due to their physical presence.
2. Basic principles for determining the amortization period of intangible assets
The amortization period of an intangible asset begins when it is available for use and ends when it ceases to be used or sold. The calculation method is "counting the beginning and not the end", that is, including the month when it is available for use but not including the month when it is stopped for use or sold. The following aspects should be grasped when applying it specifically:
1. When the intangible assets are available for use, it means that the intangible assets have reached the point when they can be used technically, legally and economically, usually when they have reached the point where they can be used. The month available for use.
This is different from the starting point for accruing depreciation of fixed assets. For fixed assets added in the current month, no depreciation will be accrued in that month, but depreciation will be accrued from the next month.
2. When the use of the intangible asset is stopped, it refers to the point when the intangible asset can no longer bring economic benefits to the small business due to technical, legal, economic and other reasons. It usually refers to the legal status of a certain intangible asset. The protection period has expired, a certain intangible asset has fallen behind due to technological progress, etc. Since the intangible assets have ceased to be used, they should no longer be amortized.
3. Sale refers to the point when intangible assets are transferred from self-use to external sales. Once an intangible asset is sold to external parties, it means that it can no longer bring economic benefits to small businesses in the future. Therefore, there is no question of amortizing it.
4. When calculating and determining the amortization period, the month of discontinuation of use and sale is not included. At this point, it is different from the time when depreciation of fixed assets stops. For fixed assets that are reduced in the current month, depreciation will still be accrued in that month, but no depreciation will be accrued from the next month.
III. Specific Determination of the Amortization Period of Intangible Assets
The service life of intangible assets includes two situations: legal life and non-legal life. The service life of some intangible assets is limited by law. , regulations or contractual restrictions, called statutory life. For example, Chinese law stipulates that invention patent rights are valid for 20 years and trademark rights are valid for 10 years. The lifespan of some intangible assets, such as permanent franchises and non-patented technologies, is not limited by law or contract.
In order to facilitate the practical operation of small businesses, these standards distinguish between two situations and stipulate the amortization period of intangible assets.
(1) If the useful life is stipulated in relevant laws or contracts, it can be amortized in installments according to the stipulated or agreed useful life
This provision should be understood from the following aspects :
1. The basis for determining the amortization period of intangible assets is legal provisions and contractual agreements.
2. As long as there are clear provisions in the law, the amortization period shall be the period specified by the law. For example, a small business obtains the right to use a piece of land by paying a land transfer fee. If the company intends to continue to hold it and has no plans to sell it within 50 years, the period during which the land use right is expected to bring future economic benefits to the company is 50 years.
3. As long as there is a clear agreement in the contract, the amortization period shall be the period specified in the contract. For example, if an investor in a small business invests in land use rights, and the investment contract stipulates that the cooperative operation period of the small business is 20 years, then the amortization period of the land use rights obtained by the small business should be 20 years.
4. If there are both legal provisions and contractual agreements, it is usually governed by the principle of whichever is shorter.
5. Since the provisions of the law and the stipulations of the contract are followed, the amortization period is not limited to 10 years, and can be longer than 10 years or shorter than 10 years.
(2) If a small enterprise cannot reliably estimate the useful life of intangible assets, the amortization period shall not be less than 10 years.
This provision should be understood from the following aspects:
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1. The inability to reliably estimate the useful life of intangible assets means that there are no legal provisions or contractual provisions on the useful life of intangible assets.
2. In this case, the minimum amortization period is 10 years.
3. If there are no reasonable technical, legal, economic reasons and conclusive evidence, this standard recommends that the amortization period of this type of intangible assets be selected as 10 years to improve the quality of this type of assets. , to avoid falsely counting assets.
Accounting subjects involved in this article: Small businesses should set up accounting subjects such as "1702 Accumulated Amortization" in accordance with the provisions of this article and based on their own actual conditions.
Examples of application of this article
Example 2-38 On January 1, 2013, Company B owned a franchise with a cost of 480,000 yuan and a benefit period of 10 years as stipulated in the contract. The net salvage value is expected to be zero.
The monthly amortization amount that Company B should provide = 480 000? 10? 12 = 4 000 (yuan)
When amortizing each month, Company B should prepare the following accounting Entry:
Debit: administrative expenses 4,000
Credit: accumulated amortization 4,000
Example 2-39 In 2013, Company A amortized intangible assets The amount is 100,000 yuan, all of which are included in administrative expenses. The accounting entries are as follows:
Debit: administrative expenses 100,000
Credit: accumulated amortization 100,000
Original text of the standard No. Article 42 When disposing of intangible assets, the net amount of the disposal income after deducting its book value, relevant taxes, etc. shall be included in non-operating income or non-operating expenses.
The book value of intangible assets referred to in the preceding paragraph refers to the cost of intangible assets minus accumulated amortization.
Interpretation of this article is about the accounting treatment of disposal of intangible assets.
Intangible assets of small businesses will eventually exit the enterprise through use or sale. Therefore, the disposal of intangible assets is also an indispensable and important part of the accounting treatment of intangible assets.
Related links Article 32 of the Implementation Regulations of the Enterprise Income Tax Law stipulates: The losses mentioned in Article 8 of the Enterprise Income Tax Law refer to the losses of fixed assets and inventories that occur in the production and operation activities of an enterprise. Damage, scrapping losses, transferred property losses, bad debt losses, bad debt losses, losses caused by force majeure factors such as natural disasters, and other losses. For losses incurred by an enterprise, the balance after deducting the compensation of the responsible person and insurance compensation shall be deducted in accordance with the regulations of the financial and taxation authorities of the State Council. ?
In order to simplify accounting, facilitate the practical operation of small businesses, reduce the burden of tax adjustment, and meet the needs of final settlement, the accounting treatment of the disposal of intangible assets in this article is consistent with the Implementation Regulations of the Enterprise Income Tax Law.
1. The connotation of disposal of intangible assets
In this standard, disposal of intangible assets is a very broad concept, which refers to all situations in which intangible assets are reduced due to various reasons. It mainly includes the sale of intangible assets to external parties, the scrapping of intangible assets due to technical, legal, economic and other reasons, and the use of intangible assets for external investment.
2. Determination of gains and losses from disposal of intangible assets
Since small businesses hold intangible assets mainly for their own use, although they may sometimes be sold to external parties, intangible assets are different from inventories. Based on this consideration, gains and losses arising from the disposal of intangible assets are a net concept, and this standard will be included in non-operating income or non-operating expenses.
When determining the profit or loss from the disposal of intangible assets, the following factors should be comprehensively considered:
(1) The book value of the intangible asset, that is, the cost of the intangible asset minus accumulated amortization. amount. In practice, the cost of intangible assets is reflected in the "intangible assets" account, and its corresponding accumulated amortization is reflected in the "accumulated amortization" account.
(2) Relevant taxes and fees, that is, relevant taxes and fees incurred during the disposal of intangible assets.
(3) Disposal income, that is, the price of selling intangible assets and the assessed value of intangible assets used for external investment. Usually scrapped intangible assets have no disposal value, which can be understood as zero disposal income.
Accounting subjects involved in this article: Small businesses should set up accounting subjects such as "1701 Intangible Assets" and "1702 Accumulated Amortization" in accordance with the provisions of this article and based on their own actual conditions.
Examples of the application of this article
Example 2-40 On July 31, 2013, Company A sold a patent. The cost of the patent was 600,000 yuan, and amortization of 220,000 was calculated. Yuan, the tax payable is 25,000 Yuan, the actual transfer price obtained is 500,000 Yuan, and the amount has been deposited in the bank.
Company A should prepare the following accounting entries:
Debit: bank deposit 500,000
Accumulated amortization 220,000
Credit: intangible assets 600,000
Tax payable 25,000
Non-operating income 95,000;