603.0 Accounting for Intangible Assets

Owned by Chad
Last updated: Jun 02, 2021

The following policy provides information for the consistent accounting of intangible assets and serves as a reference for answering questions relating to intangible assets. Examples of intangible assets include the following:

  • Computer Software
  • Easement/Right of Way
  • Water Rights
  • Timber Rights
  • Patent
  • Copyright
  • Trademark

CHARACTERISTICS OF INTANGIBLE ASSETS: To be recorded as an intangible asset in the PSU accounting records, the intangible asset must have the following characteristics:

  • Owned by the university
    • Expenditures for items not owned by the university are expensed.
  • Lacks physical substance
    • Assets with physical substance are recorded as tangible assets (personal property or real property).
    • Capital leases lack physical substance but are accounted for as part of tangible assets. 
  • Non-financial in nature
    • Assets in monetary form are recorded as cash or investments.
  • Used primarily for operations and not used to directly obtain income or profit.
    • Royalty agreements are not reported as intangible assets because they exist primarily to generate royalty income. Patents or copyrights underlying a royalty agreement are used primarily for operations and are therefore considered intangible assets.
    • Assets obtained for resale are not used in operations and are therefore not recorded as intangible assets
  • Separately identifiable
    • Goodwill is not recorded as an intangible asset because goodwill is not a separately identifiable asset.
    • An intangible component (right) of a tangible asset (e.g., rights associated with land ownership) is accounted as part of the tangible asset.
  • Supported by a formal agreement
    • An intangible asset is generally supported by a formal agreement that either allows PSU to sell, rent, or otherwise transfer the right to another party, or the agreement gives PSU certain contractual or other legal rights to tangible assets owned by other parties.

INTERNALLY GENERATED INTANGIBLE ASSETS: An intangible asset is considered "internally generated" if it is:

  • Created or produced by PSU or an entity contracted by PSU, or
  • Acquired from a third party but requires more than minimal incremental effort on the part of PSU to put the intangible asset in service.

Expenditures in creating the internally generated intangible asset are either expensed or capitalized, depending on the stage in the asset’s development. In initial development, all expenditures are expensed (not capitalized). Initial development ends upon the occurrence of all of the following:

  • Determination of the specific objective of the project and the nature of the service capacity that is expected to be provided by the intangible asset upon the completion of the project.
  • Demonstration of the technical or technological feasibility for completing the project so that the intangible asset will provide its expected service capacity.
  • Demonstration of the current intention, ability, and presence of effort to complete or, in the case of a multiyear projects, continue development of the intangible asset.

Expenditures incurred subsequent to meeting the above criteria are capitalized.

For more information pertaining to intellectual property, please see Innovation and Intellectual Property. 

For more information pertaining to accounting for intangible asses, please see the procedures manual.