Self-created intangible assets of fixed assets are subject to special valuation requirements in the Commercial Code. They have a special status because they have the right to activate. That is how development costs can be assessed. However, certain self-created intangible assets of the fixed assets are prohibited from activation. This applies to self-created brands, print titles, publishing rights, customer lists or comparable goods. In addition, there is an activation ban for research costs. This has an impact on accounting if there is no possibility of strictly separating research and development costs. In such a case, therefore, no development costs are considered as manufacturing costs.

1. self-created intangible assets – introduction

People think. They have ideas. Ideas are mental representations of a possible reality. And if such an idea produces something completely new, which many people would like to use, then it is best to hurry and apply for a patent on this idea. If you want to earn money with this idea by marketing it, then you are also entrepreneurial. Assuming that one becomes liable for accounting, one must also include the patent in the balance sheet. There is a whole series of special valuation rules that regulate how such self-created intangible assets are to be treated on the balance sheet. It is precisely these valuation rules in relation to self-created intangible assets that we now want to focus on.

First of all, a brief note of an orthographic nature: of course, the adjective “self-created” exists as an independent word in German. However, the first part of this technical term written separately here comes from the Commercial Code (HGB). It is therefore of legal importance, so we have decided to adopt it here in this form of writing. The corresponding counterpart of this commercial term in tax law is the intangible asset.

Special rules for self-created intangible assets – for what?

Self-created intangible assets of fixed assets are a special feature in accounting. There are accounting exceptions for them in terms of both approach and access and follow-up assessment. This is due to the unusual circumstances that distinguish self-created intangible assets from other fixed assets.

On the one hand, it must be noted that for intangible assets of the fixed assets created by oneself, neither acquisition costs nor production costs can be used in the form defined in § 255 HGB. So one should actually assume that an independent evaluability of self-created intangible assets is excluded. However, this prevents a property of potential economic importance from being disregarded. For commercial transactions, this means that the company appears less valuable to third parties than if these assets could be shown on the balance sheet.

In fact, internationally accepted valuation requirements such as IAS 38 are quite understanding of this position. Therefore, this situation is also linked to an activation right. Therefore, the legislator decided in the preparation of the BilMoG, that now also self-created intangible assets of the fixed assets in the balance sheet. Finally, this has previously led to a disadvantage for companies based in Germany compared to foreign companies.

Self-created intangible property: special features

3.1 Right to vote for activation of self-created intangible assets

In addition to the activation requirement for acquired intangible assets, there are now also special rules for self-created assets of this type. Thus, § 248 paragraph 2 sentence 1 HGB allows that one may include in the balance sheet intangible assets created by oneself. So here there is a right to vote, which only exists since the modernization of the balance sheet law by the BilMoG.

3.2. Recognition of production costs of own-created intangible assets over development costs

If you now want to activate self-created intangible assets in the balance sheet, then you have to consult § 255 paragraph 2a HGB. It says that development costs can be taken into account as manufacturing costs. The paragraph distinguishes between research and development. It also defines what these terms mean. This is important because the same paragraph also stipulates that there is a ban on activation in connections where it is not possible to strictly separate research and development costs. So you can only activate the development costs as production costs and only if you can separate them cleanly from the research costs.

3.3. Special features in the subsequent valuation of own-created intangible assets

A third peculiarity in the accounting for intangible assets created by the company relates to subsequent valuation. More specifically, this concerns the scheduled depreciation of capitalised intangible assets of the fixed assets. If no reliable estimate can be made for the period of use, then the legislator prescribes a flat-rate period of use of ten years in § 253 (3) sentence 3 HGB. In such a case, therefore, 10 % of the production costs are usually written off annually.

Incidentally, when assessing the useful life of such self-created intangible assets of the fixed assets, the prerequisite is of course that they are carefully valued commercially.

Self-created intangible assets – Conclusion

So you can see that legislators, in their efforts to modernize accounting rules in order to adapt them to the realities of a globalized business world, have taken the right path in accounting for self-created intangible assets. In this case, the abandonment of the prior activation ban on development costs benefits in particular those industries which are correspondingly expensive in this area. For example, the chemical and pharmaceutical industries, mechanical engineering and car manufacturers and their suppliers can be mentioned. But the increasingly emerging environmental and climate protection industry will also benefit from this. In these and many other areas, Germany in particular is expected to see increased commitment in the medium and long term. Accordingly, the importance of accounting for self-created intangible assets increases.

Of course, startups would also like to set their research costs here in order to illustrate the value of their still young company, especially to investors. However, the activation ban for research costs is linked to the periodization principle. However, because no one can establish a reliable link between the capitalisation value of research costs and the economic benefits that research will subsequently actually offer the company, the ban on activation continues to be important both nationally and internationally.