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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II RECOGNITION CHAPTER III INITIAL MEASUREMENT CHAPTER IV SUBSEQUENT MEASUREMENT CHAPTER V DISPOSAL AND DISCARD CHAPTER VI DISCLOSURE CHAPTER I GENERAL PROVISIONS Article 1. For the purpose of regulating the recognition and measurement of intangible assets and disclosure of related information, these Standards are formulated in accordance with the Accounting Standards for Enterprises-Basic Standards. Article 2. The following items shall be governed by other relevant accounting standards: (1) The right to use the land as investment real estates shall be governed by the Accounting Standards No. 3-Investment Real Estates; (2) The business reputation formed during the merger of enterprises shall be governed by the Accounting Standards No. 8-Asset Impairment and Accounting Standards No. 20-Merger of Enterprises; and (3) The rights and interests related to oil and natural gas mining areas shall be governed by the Accounting Standards for Enterprises 27-Exploitation of Oil and Natural Gas. CHAPTER II RECOGNITION Article 3. The "intangible assets" refers to the identifiable non-monetary assets which have no physical shape and are possessed or controlled by enterprises. An asset, which satisfies any of the following conditions, meets the identifiable standards as mentioned in the definition of intangible assets: (1) Being able to separate or divide from the enterprise and being able to be sold, transferred, licensed, rented or exchanged independently or along with the relevant contract, asset or liability; or (2) Being sourced from any contractual right or other statutory rights, no matter whether or not these rights can be transferred or separated from the enterprise or other rights and obligations. Article 4. No intangible asset may be recognized unless it simultaneously satisfies the following conditions: (1) The economic benefits relating to the intangible asset are likely to flow into the enterprise; and (2) The cost of the intangible asset can be measured reliably. Article 5. When an enterprise makes a judgment about whether or not the economic benefits generated by an intangible asset is likely to flow into it, it shall make a reasonable estimation to all potential economic factors within the expected useful life of the intangible asset and shall have clear evidences to support it. Article 6. An enterprise's disbursements for an intangible asset shall all be recorded in the profits and losses of the current period, unless it is under any of the following circumstances: (1) The part that meets recognition conditions as prescribed in these Standards and forms the cost of the intangible asset; and (2) The part that is obtained from the merger of an enterprise not under the same control that cannot be independently recognized as an intangible asset, and that forms a part of the business reputation recognized on the day of purchase. Article 7. An enterprise's disbursements for its internal research and development projects shall be classified into research disbursements and development disbursements. The term "research" refers to the creative and planned investigation for the purpose of acquiring and understanding new scientific or technological knowledge. The term "development" refers to the application, prior to the commercial production or use, of research achievements and other knowledge to a certain plan or design so as to produce any new material, device or product, or substantially improved material, device and product. Article 8. An enterprise's research disbursements for a internal research and development project shall be recorded in the profits and losses of the current period. Article 9. An enterprise's development disbursements for an internal research and development project shall not be recognized as intangible asset unless they satisfy the following conditions simultaneously: (1) In respect of the technology, it is feasible to finish the intangible asset for use or sale; (2) It is intended to finish and use or sell the intangible asset; (3) The ways whereby the intangible asset is to generate economic benefits, including those whereby it is able prove that there is a potential market for the products manufactured by applying this intangible asset or that there is a potential market for the intangible asset itself; if the intangible asset will be used internally, its usefulness shall be proved; (4) With the support of sufficient technologies, financial resources and other resources, it is able to finish the development of the intangible asset, and it is able to use or sell the intangible asset; and (5) The disbursements attributable to the development of the intangible asset can be reliably measured. Article 10. For an on-going research and development project which is obtained by an enterprise and is recognized as an intangible asset, the post-obtainment disbursements shall be treated in accordance with Articles 7 through 9 of these Standards. Article 11. An enterprise's self-created business reputation, or its internally made brand, newspaper or magazine name shall not be recognized as an intangible asset. CHAPTER III INITIAL MEASUREMENT Article 12. An intangible asset shall be initially measured at its cost. The cost of an intangible asset on acquisition include the purchase price, relevant taxes and other necessary disbursements which may be directly attributable to brining the intangible asset to the conditions for the expected purpose. If the payment for an intangible asset is delayed beyond the normal credit conditions and it is of the financing nature, the cost of the intangible asset shall be determined on the basis of the current value of the purchase price. The difference between the actual payment and the current value of the purchase price shall be recorded in the current profits and losses within the credit period, unless it shall be capitalized under the Accounting Standards No. 17-Borrowing Costs. Article 13. The cost of a self-developed intangible asset includes the total disbursements incurred during the period from the time when it satisfies the provisions of Articles 4 through 9 of these Standards to the time when the expected purposes of use are realized, except for the disbursements as expenses incurred prior to the said period which have already been treated. Article 14. The cost put into an intangible asset by the investor shall be determined according to the value as stipulated in the investment contract or agreement, with the exception of those of unfair value as is stipulated in the contract or agreement. Article 15. The costs of intangible assets acquired through the exchange of non-monetary assets, debt restructuring, government grants, and merger of enterprises shall be respectively determined according to the Accounting Standards No. 7-Exchange of Non-monetary Assets, Accounting Standards for Enterprises No. 12-Debt Restructuring, Accounting Standards for Enterprises No. 16-Government Grants and Accounting Standards for Enterprises No. 20-Merger of Enterprises, respectively. CHAPTER IV SUBSEQUENT MEASUREMENT Article 16. When an enterprise obtains an intangible asset, it shall analyze and judge its useful life. If the useful life of an intangible asset is limited, the enterprise shall estimate the number of years of its useful life, or the output or any other similar measurement unit which constitutes its useful life. If it is unable to forecast the time period during which the intangible asset can bring any economic benefits, it shall be regarded as an intangible asset with uncertain useful life. Article 17. With regard to an intangible asset with limited useful life, its amortization amount shall be systematically amortized within its useful life. An enterprise shall amortize an intangible asset from the time when it is available for use to the time when it is not recognized as an intangible asset. The method chosen by an enterprise for the amortization of an intangible asset shall reflect the pattern in which the economic benefits relevant to this intangible asset are expected to realize. If it is unable to determine the expected realization pattern reliably, the intangible asset shall be amortized through the straight-line method. Generally, the amortized amount of an intangible asset shall be recorded in the profits and losses in the current period unless it is otherwise provided for by other accounting standards. Article 18. The accrued amortization amount of an intangible asset shall be its cost minus the expected salvage value. For an intangible asset with an impairment provision, the accumulative amount of impairment provision shall be deducted from the cost as well. For an intangible asset with a limited useful life, its salvage value shall be regarded as zero except for the following circumstances: (1) A third party promises to purchase the intangible asset after the end of its useful life; and (2) It is able obtain the information about the expected salvage value from the active market and the market is most likely to remain when the useful life of the intangible asset ends. Article 19. An intangible asset with uncertain useful life should not be amortized. Article 20. The impairment of an intangible asset shall be treated in accordance with the Accounting Standards for Enterprises No. 8-Asset Impairment. Article 21. An enterprise shall, at least at the end of each year, review the useful life and the amortization method of an intangible asset with limited useful time. If useful life of intangible assets and amortization method different from previous estimates, the amortization period and and the amortization method should be changed. An enterprise should review the life of the intangible assets with uncertain life each accounting period. If there is evidence that the useful life of intangible assets is limited, they should estimate their service life, according to the guidelines provisions. CHAPTER V DISPOSAL AND DISCARD Article 22. Where an enterprise sells an intangible asset, it shall record the difference between the acquisition price and the carrying amount of the intangible asset in the profits and losses of the current period. Article 23. If no economic benefit is expected to be brought by an intangible asset to the enterprise, the carrying amount of this intangible asset shall be written off. CHAPTER VI DISCLOSURE Article 24. An enterprise shall, in the notes, disclose the following information related to its intangible assets on a per-category basis: (1) The beginning and ending book balances, accumulative amount of amortization, and accumulative amount of provision for impairment of the intangible assets; (2) For the intangible assets with limited useful lives, the estimates about their useful lives; for the intangible assets with uncertain useful lives, the basis for the judgment about the uncertainty of its useful life; (3) The methods for the amortization of intangible assets; (4) The carrying amount of the intangible assets used for guaranties, the amortization amount of the current period, and other information; and (5) The amount recorded in the profits and losses of the current period and recognized as the research and development disbursements for intangible assets. |
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