Determination the useful life of intangible assets with a negative depreciation

Yuri Pozdnyakov
Leading Expert Appraiser, Ukrainian Appraisers Аssociation Member, UAA Expert Council Deputy in Lviv region, Ukraine, e-mail: jerzy.pozdniakow@gmail.com, ORCID ID: https://orcid.org/0000-0001-5849-7345

Yuri Sadovenko
Appraiser, Ukrainian Appraisers Аssociation Member, Ukraine, e-mail: 444sad555@gmail.com, ORCID ID: https://orcid.org/0000-0001-7421-8422

Cite this article:

Pozdnyakov, Yu., Sadovenko, Yu. (2018). Determination the useful life of intangible assets with a negative depreciation. Ed.: M. Zveryakova (ed.-in-ch.) and others [Vyznachennіa terminu korysnogo vykorystannіa nematerialnykh aktyviv z vidiemnym znosom; za red.: М. I. Zvieriakova (gol. red.) ta in.], Socio-economic research bulletin; Vìsnik socìal’no-ekonomìčnih doslìdžen’ (ISSN 2313-4569), Odessa National Economic University, Odessa, No. 4 (68), pp. 65–76.

Abstract

The article analyzes the requirements for the useful lifetime determining of specific intangible assets, such as trademarks and goodwill, which are able to change value over the term of economic life in both directions and thus they can change the sign of accumulated depreciation. The requirements of the regulatory framework of accounting and independent evaluation, which are partially contradictory, that creates a normatively-legal collision between them, are considered. It is shown, that the pattern in market value changes with over time, and, accordingly, the depreciation sign of the investigated assets depends on the of measures implementation for their support and development, supported by appropriate investment of cash flow costs. It has been established, that during of a trademark useful livetime period, it is possible to repeatedly change of depreciation sign on certain periods of its economic life, depending on whether, the measures for its information and advertising support are carried out in sufficient quantities. The factors list, which should be taken into account when a trademark useful lifetime determining is identified and analyzed. Authors proposed, in the most general case, when further efficient use of the trademark is envisaged, to consider it an intangible asset with an indefinite (unlimited) useful lifetime. It is proved that intangible assets of this class are not advisable to depreciate in accounting, since their accumulated depreciation under normal conditions is negative, and when evaluating their value in the general case, the normal profitable activity of an enterprise should be determined with using of market value increasing model over time.

Keywords

independent valuation/appraising; accounting; market value; intangible assets; trademark; brand name; goodwill; accounting and independent valuation normative bases; methodical approaches; expenses cash flows.

JEL classification: С130; С520; С830; G120; DOI: https://doi.org/10.33987/vsed.4(68).2018.65-76

UD classification: 303.094.5:330.133.2:330.133.7

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