Unmeasured Intangibles

The accounting practice of recording an intangible expenditure as an asset on the balance sheet rather than expensing it immediately through the income statement. Under IAS 38, development costs must be capitalised once the six criteria in IAS 38.57 are met, whereas research costs must always be expensed.

A physical asset, such as land, buildings, plant and machinery, vehicles or inventory. Under IAS 16 and FRS 102 Section 17, property, plant and equipment is carried at cost less depreciation or, where an entity adopts the revaluation model for a whole class of assets, at a revalued amount; land is not depreciated.

An increase in the amount of capital available per worker, which typically raises labour productivity. In modern economies, capital deepening increasingly involves investment in intangible assets — software, data infrastructure, organisational capital, and human capital — rather than traditional machinery and equipment.

Book value is the net asset value of a company as recorded on its balance sheet — total assets minus total liabilities. The formula is simple: Book Value = Total Assets − Total Liabilities.

Intangible assets that are identified and recorded on the balance sheet for the first time as part of a business combination, despite having been unrecognised on the acquired company's own books. These assets — such as customer relationships, order backlogs, and proprietary technology — often represent a substantial portion of the total purchase price.

The process by which firms and economies accumulate intangible capital through investment in R&D, software development, training, brand building, and organisational design. Intangible capital formation is now the dominant form of business investment in advanced economies, yet it is only partially captured by national accounts and corporate balance sheets.

The investor who takes the primary role in a financing round, typically investing the largest amount, setting the terms, negotiating the term sheet, and conducting due diligence. The lead investor often takes a board seat and serves as the main point of contact for the company.

The process of assigning numerical values to attributes of objects, events, or phenomena according to defined rules and standards. In the context of intangible assets and productivity, measurement is both a fundamental challenge and a critical enabler of effective management.

AI and IAS 38: When Can You Capitalise AI Development Costs?

IAS 38 sets six criteria for capitalising development costs, but applying them to AI projects is fraught with ambiguity. This article maps each criterion to AI development realities and provides practical guidance for CFOs and accountants navigating the recognition question.

What are the ASC 350 rules for software capitalisation?

ASC 350-40 requires capitalisation of internal-use software development costs during the application development stage, while preliminary project and post-implementation costs must be expensed.

What is the difference between tangible and intangible assets?

Tangible assets have physical form: land, buildings, machinery, vehicles and stock. Intangible assets have none: they are identifiable non-monetary assets such as patents, trade marks, software and customer contracts.

How does AI create intangible value for businesses?

AI creates intangible value through proprietary algorithms, trained models, unique datasets, process automation, enhanced decision-making, and network effects that compound over time.