Intangible Asset Taxonomies: CHS vs IFRS 3 Classification Explained

Why Intangible Asset Classification Matters

Intangible assets now account for the vast majority of enterprise value in advanced economies, yet the way we classify and measure them depends entirely on which framework we use. Get the classification wrong and you risk undervaluing your company, misallocating investment, or failing a purchase price allocation.

90%+ of S&P 500 market value is intangible

£185.5B UK intangible investment in 2021 (ONS)

2 dominant classification frameworks

Two frameworks dominate the intangible asset landscape, and they serve fundamentally different purposes. Understanding both is essential for any business leader, investor, or advisor working with intangible capital.

★ Key Takeaway

There is no single "correct" taxonomy for intangible assets. The CHS framework serves strategic decision-making; the IFRS 3 / ASC 805 standard serves formal valuations and regulatory compliance. Most companies need both.

The CHS Growth Accounting Framework

The Corrado-Hulten-Sichel (CHS) framework, first published in 2005 and refined through subsequent research, was designed to measure the contribution of intangible investment to economic growth. It classifies intangible assets into categories based on the type of investment a company makes.

The Six Categories

Category	What It Covers	CHS Pillar
Technology	Software, platforms, databases, R&D infrastructure	Computerised Information
Brand & Marketing	Brand identity, advertising, customer relationships, market positioning	Economic Competencies
Intellectual Property	Patents, trademarks, copyrights, trade secrets, licensing rights	Innovative Property
Design	Product design, UX/UI, service design, architectural design	Innovative Property
Human Capital	Workforce skills, training investment, talent development	Economic Competencies
Organisational Capital	Management practices, processes, culture, proprietary methodologies	Economic Competencies

ℹ Note

Human Capital and Organisational Capital are the two categories that have no equivalent under IFRS 3 or IAS 38. This makes them Opagio's unique territory -- no competitor quantifies them because accounting standards don't require it.

When to Use CHS

The CHS framework is the right choice for strategic and operational decisions. Use it for board strategy sessions, quarterly business reviews, investment prioritisation, and intangible asset questionnaires. It answers the question: where are we investing and what return are we getting?

The IFRS 3 / ASC 805 Accounting Classification

The International Financial Reporting Standard 3 (IFRS 3) and its US equivalent ASC 805 define how intangible assets must be classified in purchase price allocations during business combinations. This is the framework that auditors, tax authorities, and transaction advisors require.

The Five Classes

Class	Examples	Typical Valuation Method
Marketing-Related	Trademarks, trade names, trade dress, domain names, non-competition agreements	Relief from Royalty
Customer-Related	Customer contracts, customer relationships, order backlog, customer lists	Multi-Period Excess Earnings (MPEEM)
Technology-Based	Patented and unpatented technology, software, databases, trade secrets, in-process R&D	Relief from Royalty / Replacement Cost
Contract-Based	Licensing agreements, franchise rights, permits, broadcast rights, lease agreements	Income Approach
Artistic-Related	Literary works, musical compositions, photographs, video or audiovisual material	Income Approach / Relief from Royalty

When to Use IFRS 3

Use this framework for formal valuations, purchase price allocations, annual financial statements, tax amortisation schedules, litigation, and loan collateralisation. It answers the question: what recognised value can we assign to each asset class?

📚 Definition

A purchase price allocation (PPA) is the process of assigning the acquisition price of a business to the individual assets acquired and liabilities assumed. Under IFRS 3 and ASC 805, intangible assets must be separately identified and valued as part of this process. Anything left over becomes goodwill.

The Gap Between the Frameworks

Here lies the critical insight: IFRS 3 cannot see everything that CHS measures. Two of the six CHS categories -- Human Capital and Organisational Capital -- have no equivalent under IFRS 3 or ASC 805. In acquisition accounting, these assets are absorbed into goodwill, a single undifferentiated residual.

What each framework can and cannot see

Asset	CHS Category	IFRS 3 Class	On Balance Sheet?
Core software platform	Technology	Technology-Based	Only if acquired
Trade name / brand	Brand & Marketing	Marketing-Related	Only if acquired
Customer contracts	Brand & Marketing	Customer-Related	Only if acquired
Patent portfolio	Intellectual Property	Technology-Based	Only if acquired
Engineering team expertise	Human Capital	Not recognised	No
Sales playbooks & processes	Organisational Capital	Not recognised	No
Training programmes	Human Capital	Not recognised	No
Internal brand equity (organic)	Brand & Marketing	Not recognised	No

⚠ Warning

Under IAS 38 and FRS 102, internally generated intangible assets cannot be recognised on the balance sheet at all. This creates a systematic undervaluation of companies that invest heavily in their people, processes, and organic brand development. If your company is knowledge-intensive, your balance sheet may be capturing less than half your actual value.

The Bottom Line

The assets that accounting standards miss are often the most valuable. A company's engineering talent, sales methodology, and management culture frequently drive more value than its patents or customer contracts, yet they are invisible under traditional reporting. This is why growth-stage companies and knowledge-intensive businesses are systematically undervalued.

When to Use Which Framework

The right framework depends on your context. In many situations, you need both.

Scenario	Primary Framework	Why
Board strategy session	CHS	Actionable investment decisions
Quarterly business review	CHS	Track investment vs productivity trends
Series C investor data room	Both	CHS for strategy narrative; IFRS 3 for valuation support
Purchase price allocation	IFRS 3	Required by accounting standards
PE exit preparation	Both	IFRS 3 for the transaction; CHS for the value creation story
Due diligence response	Both	IFRS 3 for the numbers; CHS for the context
ESG / CSRD disclosure	CHS	Human Capital reporting maps directly
Litigation / IP dispute	IFRS 3	Courts require recognised valuation standards

Use CHS When You Need To...

Decide where to invest next
Track productivity impact of intangible spending
Report to the board on intangible asset health
Tell the value creation story to investors
Assess all six categories including human and organisational capital

Use IFRS 3 When You Need To...

Complete a purchase price allocation
File audited financial statements
Calculate tax amortisation benefits
Support litigation or IP disputes
Collateralise intangible assets for lending

✔ Example

A PE firm preparing for exit would use the CHS framework to build the value creation narrative for the information memorandum -- showing how intangible investments drove productivity growth over the hold period. Simultaneously, the IFRS 3 classification would be used for the purchase price allocation to give buyers the formal asset breakdown they need for the transaction.

How Opagio Bridges Both

The Opagio Growth Platform is built to support both frameworks simultaneously.

Track investments using CHS categories

The Intangible Asset Valuator uses the six CHS categories for interactive modelling and investment tracking. Input your financial data and see how it decomposes across Technology, Brand, IP, Design, Human Capital, and Organisational Capital.

Auto-map to IFRS 3 in reports

Every generated valuation report includes an IFRS 3 / ASC 805 mapping section, showing how each CHS category translates to the accounting standard classes -- complete with typical valuation methods and goodwill notes for Human Capital and Organisational Capital.

Assess maturity across all six categories

The Intangibles Questionnaire scores your company across all six CHS categories, providing a structured view of assets that no balance sheet can show. For investors, the portfolio dashboard aggregates data across holdings using both frameworks.

This dual-framework approach means companies can use a single platform for both operational decision-making (CHS) and formal compliance (IFRS 3), without maintaining separate systems or reconciling conflicting classifications.