Can I revalue an intangible asset under FRS 102?

This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members to understand when it may be possible to revalue intangible assets and the criteria for doing so under FRS 102.

Members may also wish to refer to the following related helpsheet:

• Accounting for intangible assets and goodwill under FRS 102

In theory it is possible to revalue an intangible under FRS 102 but the criteria for doing so are quite strict.

FRS 102 paragrahph 18.18 allows a revaluation model but only if the fair value can be determined by reference to an active market, a requirement which is very difficult for intangible assets to meet.

Active market is defined in the glossary to FRS 102 as a market in which all the following conditions exist:

• the items traded in the market are homogeneous;
• willing buyers and sellers can normally be found at any time; and
• prices are available to the public.

The requirement for the items traded to be homogenous is perhaps the most significant hurdle to revaluing an intangible asset as intangibles, by their nature, are usually (but not always) unique. For example, patents and trademarks are unique to the entity that holds them and thus an active market, as defined by FRS 102, for them cannot exist.

In some jurisdictions active markets may exist for intangibles such as fishing licences or production quotas but this would need to be carefully considered on a case by case basis.

The need for willing buyers and sellers to be able to be found at any time and prices to be available to the public adds further complications.

It is not permitted to revalue an intangible asset which has not previously recognised as an asset and all intangible assets must be recognised initially at cost.

In summary, it is possible to revalue intangible assets under FRS 102 but the stringent criteria to do so means that in practise, revaluing intangible assets will be rare occurrence under FRS 102.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.