Artistic-related intangible assets – In a Business Combinations, these are intangible assets and are therefore recognised separately from goodwill, provided that their fair values can be measured reliably. These artistic-related intangible assets meet the definition of an intangible asset because they arise from contractual or other legal rights.
Artistic-related assets acquired in a business combination meet the criteria for identification as intangible assets if they arise from contractual or legal rights such as those provided by copyright. Copyrights can be transferred either in whole through assignments or in part through licensing agreements. An entity is not precluded from recognising a copyright-intangible asset and any related assignments provided they have similar useful lives.
- Plays, operas and ballets
- Books, magazines, newspapers and other literary works
- Musical works such as compositions, song lyrics and advertising jingles
- Pictures and photographs
- Video and audiovisual material, including films, music videos and television program
Overview of separately identified intangible assets (SIIA) acquired
IP in media is more prevalent in the entertainment and publishing sub-sectors than in advertising & marketing services. This is likely due to the incidence of the various forms of content such as programmes, libraries, rights, exclusive content, films and books. The value in the creation and exploitation of content underpins the value of entities in these sub-sectors. The main identified intangibles relating to the entertainment sector are artistic-related intangibles. Libraries form a valuable asset for the acquirer due to the expected income stream such as royalties.
Artistic-related intangibles include items such as copyrights, which protect ownership rights. In other words, someone can’t use the company’s printed work (books, poems, and the like) or recorded work (musical score, song lyrics, movies, and so on) without permission. Any original piece of work is automatically copyrighted.
Capitalize the cost to acquire a copyright and also the cost to defend it if some nasty plagiarizer starts using the material without permission. Then allocate the costs of the copyrights to its useful life.
The difference between artistic-related intangible assets and contract-related assets is that artistic-related assets have copyrights to protect the ownership rights, and contract-related assets represent the value of rights that arise from contractual arrangements.
IFRS 9 introduced a forward-looking expected credit loss impairment model. In applying IFRS 9, a smaller lending organization is looking at the probability that a counterparty will default.
There are three stages to consider (excluding purchased or originated credit impaired instruments):
Stage 1 – If a financial asset is subject to low credit risk at the reporting date, an amount equal to 12 month expected losses would be recognized.
Stage 2 – If the credit risk increases significantly from initial recognition, an amount equal to lifetime expected credit losses would be recognized. Interest revenue would be on the gross basis.
Stage 3 – If the financial asset meets the credit impaired definition, an amount equal to lifetime expected credit losses would be recognized and interest revenue would be on the net basis, rather than on the gross amount.
Valuation of artistic-related intangible assets: Contract-based intangible assets
All intangible asset valuation approaches may be applicable to most contract valuations. These are:
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