Internally generated brands, mastheads, titles and customer lists

Learning objectives

• Identify the internally generated items that are never recognised (brands, mastheads, customer lists).L1, L2
• Analyse the treatment of an internally generated brand compared with an acquired brand.L2, L3

Normative references

• IAS 38 §63Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets.
• IAS 38 §64Their cost cannot be distinguished from the cost of developing the business as a whole.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

16 questions

• Which of the following items, when internally generated, are never recognised as intangible assets?L1
• Over the years, Mirabel has built its own customer list, which it could rent to business partners, as is common practice in its industry. The finance director argues that, since the list is identifiable, it must be recognised as an intangible asset. What conclusion should be drawn?L3
• The Orvino group is listing its expenditure for the year. Which items can be recognised as intangible assets?L3
• The Teodor group has owned for twenty years a confectionery brand that it created and developed itself. This year, it acquires Mielina in a business combination; Mielina's brand is measured at 1,800,000 at the acquisition date, and an expert estimates that Teodor's historical brand would be worth 5,000,000. The finance director wishes to present both brands consistently. Which treatment should be adopted in the consolidated financial statements?L4
• True or false? A customer list that an entity has built up itself through its sales is not recognised as an intangible asset.L1
• True or false? A newspaper publisher may recognise as an intangible asset the masthead of its daily paper, created internally, at the cost of its graphic design.L1
• True or false? Internally generated brands are not recognised notably because their cost cannot be distinguished from the cost of developing the business as a whole.L2
• True or false? An internally created brand may be recognised as an asset as soon as the expenditure on creating and launching it can be measured reliably.L2
• Pellia creates its own clothing brand: logo design by a graphic designer and launch advertising campaigns. How does it treat the brand thus generated internally?L1
• Corvel buys from a third party, for 400,000, the brand of a range of biscuits; this brand meets the recognition criteria for an intangible asset. In the same year, it launches a second brand, Doria, designed by its own teams, on which it spends 150,000 on design and advertising. Which statement is correct?L2
• Through its loyalty programme, Ondine has built up internally a file of 80,000 customers, which a consultant values at 600,000. To recruit these customers, it spent 90,000 on promotional campaigns. What amount is recognised as an intangible asset for this file?L2
• At 31 December 20X1, Hestia, a cosmetics group, lists the following items. Which of them are recognised as intangible assets?L3
• Which of the following statements about internally generated brands, titles and customer lists are correct?L2
• The cosmetics manufacturer Aldea has spent 2,400,000 over three years creating and promoting its Solene brand, which has become very well known. A firm now values the brand at 9,000,000. The finance director proposes recognising it as an asset, either at its cost or at its estimated value. What is your answer?L2
• In 20X1, the Tessin group acquires Brivo in a business combination; the Brivo brand is recognised at its fair value at the acquisition date, i.e. 1,200,000. In 20X2, Tessin spends 300,000 on advertising campaigns to relaunch the Brivo brand and 200,000 to promote its own Tessin brand, created internally. Which treatment is correct in 20X2?L3
• Altivo, a cosmetics company, created its own brand two years ago. In 20X5, it spends 300,000 on advertising and promotion of this brand and 40,000 to train its sales advisers. The CFO proposes to recognise 340,000 as an asset labelled Altivo brand, amortised over five years, because brand awareness has clearly grown. Which position do you take?L2