Capitalization (balance sheet) of property rights

Since 2010, reporting companies have had the option of reporting internally generated intangible assets (e.g. patents) in the balance sheet.

While purchased intellectual property rights could previously be treated as part of fixed assets, the capitalization of expenses in connection with self-produced industrial property rights was previously not permitted. On the one hand, this restricted the scope for action under tax law, but also meant that even valuable patents (insofar as they were based on the company's own developments) could not be shown as fixed assets, which could make it more difficult for young companies, for example, to present the company's financial circumstances to investors.

§ Section 248 (2) sentence 1 HGB provides the option of including self-created intangible fixed assets as an asset item in the balance sheet. However, sentence 2 of the standard contains a restriction to the effect that self-created trademarks, print titles, publishing rights, customer lists or comparable intangible assets may still not be included in the balance sheet. Of particular interest are therefore the intangible assets that are connected with the development and subsequent acquisition (i.e., application for property rights) of patents and utility models (technical property rights) and design rights.

If the company wishes to make use of the option of capitalisation and the general conditions are met (independent usability and evaluability), not only the costs, e.g. of the patent application, can be capitalised, but also the costs of the development at the end of which a new product - which is protected by the patent - is to be developed. Here, there may be a problem of delimitation, as research costs may still not be capitalized according to § 255 (2) p. 4 HGB. Capitalisation is only permitted if the research phase can be clearly separated from the development phase (§ 255 (2) sentence 4 HGB).

The new provisions apply to financial years beginning after 31 December 2009. Thus, only costs for patents (and comparable intangible assets) whose development was not commenced until January 1, 2010 may be capitalized.

The possible capitalisation of intangible assets provides the company with new scope for structuring its business, e.g. by differentiating between research and development. Once capitalisation has been completed, the actual value of a patent can be adjusted to the value shown in the balance sheet by adjusting amortisation periods.