ASBE No. 06
Active
Intangible Assets
Intangible Assets is part of the Chinese Accounting Standards for Business Enterprises (ASBE).
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Conceptual Framework Linkage
Identifiable non-monetary assets without physical substance
ASBE No. 6 governs IDENTIFIABLE non-monetary ASSETS WITHOUT physical SUBSTANCE – patents, TRADEMARKS, copyrights, and (GENUINELY distinctively) LAND USE RIGHTS held for the enterprise's OWN operational USE. The Standard is BROADLY converged with IAS 38 internationally, INCLUDING the SAME research/development CAPITALISATION split, though it SHARES the SAME cost-model-ONLY restriction seen ELSEWHERE across the ASBE ASSET standards.
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Scope and Recognition Criteria
Identifiability, control, and probable future economic benefit
An INTANGIBLE asset is RECOGNISED where it is IDENTIFIABLE (SEPARABLE, or ARISING from CONTRACTUAL/legal RIGHTS), CONTROLLED by the ENTERPRISE, and EXPECTED to GENERATE probable FUTURE economic BENEFITS, WITH its cost MEASURABLE reliably.
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Land Use Rights as Intangible Assets
A genuinely distinctive classification reflecting China's land system
GIVEN China's STATE (or COLLECTIVE) land OWNERSHIP system, enterprises HOLD "LAND USE RIGHTS" – a CONTRACTUAL right to USE land for a DEFINED period – RATHER than FREEHOLD land OWNERSHIP. WHERE such RIGHTS are held for the enterprise's OWN operational USE (as OPPOSED to leasing OUT or capital APPRECIATION, which would FALL under ASBE No. 3, Investment Property), they are CLASSIFIED as INTANGIBLE assets under THIS Standard – a GENUINELY distinctive CLASSIFICATION without a DIRECT IFRS/US GAAP PARALLEL, since NEITHER framework has an EQUIVALENT land-TENURE construct of the SAME type.
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Initial Measurement – At Cost
Purchase price plus directly attributable costs
An INTANGIBLE asset ACQUIRED separately is MEASURED at COST – the PURCHASE price PLUS directly ATTRIBUTABLE costs of PREPARING the asset for its INTENDED use. INTANGIBLE assets ACQUIRED WITHIN a business COMBINATION are measured at FAIR VALUE at the ACQUISITION date (UNLESS the combination is UNDER common CONTROL – see the COMPANION ASBE No. 2 poster).
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Internally Generated Intangibles – the Research/Development Split
Research expensed, development capitalised if criteria are met
EXPENDITURE incurred DURING the RESEARCH phase (ORIGINAL, planned INVESTIGATION undertaken with the PROSPECT of gaining NEW scientific or TECHNICAL knowledge) is EXPENSED as INCURRED – the enterprise CANNOT yet DEMONSTRATE that a FUTURE economic BENEFIT will FLOW. EXPENDITURE incurred DURING the DEVELOPMENT phase (APPLYING research FINDINGS to a PLAN for producing NEW or SUBSTANTIALLY improved PRODUCTS or processes) MAY be CAPITALISED, but ONLY if SPECIFIC criteria are MET (Section 6) – a SPLIT CONVERGED with IAS 38's OWN research/development DISTINCTION internationally.
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Development-Phase Capitalisation Criteria
All conditions must be demonstrated
Technical feasibility of completing the intangible asset for use or saleIntention to complete the intangible asset and use or sell itAbility to use or sell the intangible assetHow the intangible asset will generate probable future economic benefitsAvailability of adequate resources to complete developmentAbility to measure the development expenditure reliably
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Subsequent Measurement – Amortisation and the No-Revaluation Rule
Cost model only, consistent with fixed assets
CONSISTENT with the SAME cost-model-ONLY restriction seen for FIXED assets (ASBE No. 4), NO revaluation MODEL is available for INTANGIBLE assets under ASBE No. 6 – they are CARRIED at COST less ACCUMULATED amortisation (for FINITE-life intangibles) and IMPAIRMENT.
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Finite vs Indefinite Useful Life
Amortisation only for finite-life intangibles
Intangible ASSETS with a FINITE useful LIFE are AMORTISED systematically OVER that LIFE. Intangible ASSETS with an INDEFINITE useful LIFE (WHERE there is NO foreseeable LIMIT to the PERIOD over WHICH the asset is EXPECTED to GENERATE benefits) are NOT amortised, but are TESTED for IMPAIRMENT ANNUALLY – CONSISTENT with IAS 38's OWN approach internationally.
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Worked Example – Capitalising Development Costs
Splitting research and development expenditure
Example: A new product development project
A company spends RMB 3,000,000 on early-stage research into a new technology (technical feasibility not yet established), and a further RMB 5,000,000 on subsequent development after feasibility, intent, and resources are all clearly demonstrated.
The RMB 3,000,000 RESEARCH cost is EXPENSED as incurred. The RMB 5,000,000 DEVELOPMENT cost is CAPITALISED as an intangible asset, since ALL the development-phase CRITERIA (Section 6) are DEMONSTRATED – to be AMORTISED over its USEFUL life once the asset is READY for its intended USE.
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Worked Example – Amortising a Land Use Right
A distinctively Chinese intangible asset
Example: A 50-year land use right for a factory site
A company acquires a land use right for its own factory site, at a cost of RMB 40,000,000, for a defined term of 50 years.
The company recognises an INTANGIBLE ASSET of RMB 40,000,000, AMORTISED on a straight-line BASIS over the 50-year TERM: RMB 40,000,000 ÷ 50 = RMB 800,000 per year – a GENUINELY distinctive CLASSIFICATION reflecting China's land TENURE system.
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Disclosure Requirements
What ASBE No. 6 requires
Useful lives (finite or indefinite), and amortisation methods, by class of intangible assetResearch and development expenditure recognised as an expense during the periodCarrying amount of intangible assets with restricted title or pledged as security
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Determining the point at which a project moves from research to developmentWhether an intangible asset has a finite or indefinite useful life
SIGNIFICANT ESTIMATES
Useful life and amortisation method for finite-life intangibles
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Relationship to IAS 38
Comparison – ASBE 6 vs IAS 38
FeatureASBE 6IAS 38
Research/development splitSame criteriaSame criteria – converged
Revaluation modelNOT permittedPermitted (rarely used) where an active market exists
Land use rightsClassified as intangible assetsNo direct equivalent construct
The RESEARCH/development FRAMEWORK is genuinely CONVERGED – the DISTINCTIVE features are the ABSENCE of a REVALUATION option (consistent with the OTHER ASBE asset standards) and the LAND use RIGHTS classification REFLECTING China's OWN land tenure SYSTEM.
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Statement Mapping
Where every intangible asset event lands
EventStatement(s) affectedNotes
Research expenditureISExpensed as incurred
Development expenditure (if criteria met)BSCapitalised, amortised once the asset is ready for use
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Related Standards
Cross-reference map
StandardConnection
ASBE No. 3Investment Property – governs land use rights held for leasing out or capital appreciation, outside this Standard's scope
ASBE No. 8Impairment of Assets – governs the no-reversal impairment framework applicable to intangible assets
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Quick-Reference Glossary
Land use right (土地使用权)
A contractual right to use state- or collectively-owned land for a defined term, classified as an intangible asset when held for the enterprise's own operational use.
Development phase
The stage of an internal project applying research findings to a plan for producing new or improved products, where expenditure may be capitalised if strict criteria are met.
Financial statement key (Chinese GAAP / ASBE terminology)
BS Balance Sheet (资产负债表)
IS Income Statement (利润表)
SCOE Statement of Changes in Owners' Equity (所有者权益变动表)
CFS Cash Flow Statement (现金流量表)
History & Development
2006-02
ASBE No. 6 Intangible Assets issued
Operative for periods beginning on or after 1 February 2007