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.
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.
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 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 groups intangible investment into three pillars: computerised information, innovative property and economic competencies. This guide uses six practical categories that span the three pillars.
| Category | What It Covers | CHS Pillar |
|---|---|---|
| Technology | Software, platforms, databases, IT 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 |
| Organizational Capital | Management practices, processes, culture, proprietary methodologies | Economic Competencies |
Human Capital and Organizational Capital are the two categories that have no equivalent under IFRS 3 or IAS 38. Because accounting standards do not require them to be measured, they are the categories most companies never quantify.
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 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.
| 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 |
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?
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.
Here lies the critical insight: IFRS 3 cannot see everything that CHS measures. Two of the six categories -- Human Capital and Organizational Capital -- have no equivalent under IFRS 3 or ASC 805. In acquisition accounting, these assets are absorbed into goodwill, a single undifferentiated residual.
| Asset | IFRS 3 Class | On Balance Sheet? |
|---|---|---|
| Core software platform | Technology-Based | Only if acquired |
| Trade name / brand | Marketing-Related | Only if acquired |
| Customer contracts | Customer-Related | Only if acquired |
| Patent portfolio | Technology-Based | Only if acquired |
| Engineering team expertise | Not recognised | No |
| Sales playbooks & processes | Not recognised | No |
| Training programmes | Not recognised | No |
| Internal brand equity (organic) | Not recognised | No |
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 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.
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 |
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.
Opagio Intangibles helps companies and investors identify, measure and value their intangible assets.
The Opagio 12 Quick Assessment scores your business across the Opagio 12 value drivers, giving a structured view of assets that no balance sheet can show.
Opagio 12 is Opagio's framework. The Opagio 12 value drivers cover modern assets that CHS predates, such as network effects and switching costs, and give a fuller view of data.
Opagio Intangibles values assets with standard methods such as Relief from Royalty, MPEEM and With-and-Without.
David Stroll is a co-founder of Opagio, specialising in macro-economic policy, institutional investment, and IAS 38 compliance. Meet the team.
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