Acquiring Intangible Assets

The purchase price of an operating business is usually attributable to net tangible assets and intangible assets, such as customer relationships or a brand name. Intangible assets may comprise a sizable portion of the total assets acquired.

Reporting entities are required to allocate the acquisition cost to (and separately recognise) the target's "identifiable" assets, liabilities and contingent liabilities at their fair values at the acquisition date (subject to certain provisos).

Identifiable assets arise from contractual or other legal rights or are capable of being separated from the entity and transferred or rented. Examples include customer contracts and related customer relationships, customer lists, trade names, domain names and computer software. Consequently, a target's qualifying intangible assets must be valued by reporting entities at their fair values for financial reporting