Can you capitalise intangible assets on the balance sheet?
Short Answer
Yes, under IAS 38 and ASC 350, intangible assets can be capitalised when they meet specific recognition criteria — but internally generated goodwill and many R&D costs must be expensed.
Full Explanation
Yes, under IAS 38 and ASC 350, intangible assets can be capitalised when they meet specific recognition criteria — but internally generated goodwill and many R&D costs must be expensed.
The rules for capitalising intangible assets differ between acquisition and internal development. Acquired intangible assets (through business combinations under IFRS 3 or ASC 805) are always recognised at fair value on the balance sheet. Internally developed intangibles face stricter criteria: under IAS 38, development costs can only be capitalised once technical feasibility, intent to complete, ability to use or sell, probable future economic benefits, adequate resources, and reliable cost measurement are all demonstrated. Research costs must always be expensed. Under US GAAP, internal-use software development costs, including most AI built for internal use, are capitalised during the application development stage (ASC 350-40); ASU 2025-06 replaces those stages for annual periods beginning after 15 December 2027 with a committed-funding and probable-completion test. Brands, mastheads, customer lists, and similar items generated internally cannot be capitalised under either framework. This asymmetry means that organically grown companies often have significantly understated balance sheets relative to companies that grow through acquisition.
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