Intangible assets - worth knowing


Definition - Intangible assets

According to Art. 22 b paragraph. 1 of the Personal Income Tax Act, intangible assets mean property rights acquired by an entity, classified as fixed assets, suitable for economic use, with an expected useful life longer than one year, intended for use by the entity.

These are in particular: proprietary copyrights, related rights, licenses, concessions; rights to inventions, patents, trademarks, utility and decorative models; know - how.

Intangible assets handed over for use under a rental, lease or leasing agreement are classified as fixed assets of one of the parties to the agreement. Additionally, the acquired goodwill and the costs of completed development rights can be classified as intangible assets.

Valuation and depreciation of intangible assets

When measuring the initial value of intangible assets, one should - as in the case of fixed assets - take into account:

  • in the case of a purchase for consideration - the purchase price
  • in the case of free admission (also donation) - the current market price
  • in the case of acquisition in the form of a contribution in kind - the value of this component, as declared in the articles of association, but this value should not be higher than its market value.

Intangible assets are amortized. However, depreciation rates in their case are not set in advance. The owner has the option to determine the rate himself, he only needs to take into account the depreciation period, which cannot be shorter than:

  • for licenses (sub-licenses) for computer programs and for copyrights - 24 months
  • for a license to display films and to broadcast radio and television programs - 24 months, provided that the contractual period of use is not shorter
  • for incurred costs of completed development works - 12 months
  • for other intangible assets - 60 months.

When determining the depreciation rate, it should also be remembered that the selection is made only once, before the commencement of depreciation, for the entire depreciation period and it is not possible to make changes during it.

Modernization of intangible assets

Intangible assets cannot be improved or modernized. If an expense is incurred in connection with the value held, it should be booked as other business-related expenses or as a new intangible asset. This is especially important in the context of computer software licensing. If, as part of an update or upgrade, it is necessary to purchase a new program, a completely new intangible and legal asset is created. Otherwise, we qualify the incurred expenditure to other business costs.