IP - legal expenses?

I have been told that in USA, costs associated with the registration application for an internally developed patent should be capitalized. However, para # 10 of "Statement of Financial Accounting Standards No. 142 (Goodwill and Other Intangible Assets)" says : "Costs of internally developing, maintaining, or restoring intangible assets (including goodwill) that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole, shall be recognized as an expense when incurred". So, why does legal work (in connection with internally developed patent applications) gets capitalized in the US? Let me clarify more. The sentence from SFAS appears a bit complex : "Costs ... that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole, shall be recognized as an expense when incurred". Hence, liberal48's answer : 'A patent is an asset that is "specifically identifiable," has a "determinate life," and is not "related to an entity as a whole."', doesn't follow from SFAS. SFAS sentence implies that the cost under consideration (say legal expenses) should be specifically identifiable to a particular asset, e.g., patent, before it can be capitalized. However, even the SFAS sentence appears ill-constructed. How can "costs" have "indeterminate lives"? If an asset's indeterminate life is meant instead, the sentence appears poorly drafted.

4 months ago - 1 answers