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Intangible assets and goodwill under FRS 102

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Published: 01 Mar 2017 Reviewed: 12 Aug 2022 Update History

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Technical helpsheet to help ICAEW members understand key aspects of accounting for intangible assets and goodwill under FRS 102.


This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members understand key aspects of accounting for intangible assets and goodwill under FRS 102.

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

Intangible assets in a business combination

Accounting for intangible assets acquired in a business combination varies considerably depending on whether or not the Triennial Review amendments are applied.

Periods commencing prior to 1 January 2019 without early adoption of the Triennial Review amendments

Prior to the Triennial Review amendments, FRS 102 (September 2015) paragraph 18.8 required most intangible assets acquired as part of a business combination to be separately recognised from goodwill on acquisition.

An exception to this is where the intangible asset arises from legal or other contractual rights and there is no history or evidence of exchange transactions for the same or similar assets, and otherwise estimating the fair value would be dependent on immeasurable variables.

Periods commencing 1 January 2019 onwards (or if the Triennial Review amendments are early adopted)

The Triennial Review amendments to FRS 102 make significant changes to the above and in some cases allow more of an accounting policy choice which must be consistent by class (i.e. having similar nature, function or use in the business). These requirements come from paragraph of 18.8 (March 2018) and are summarised in the table that follows.

Where all three of the criteria (a), (b) and (c) described below are met, the intangible asset must be recognised separately from goodwill. Where either (a) and (b) only, or (a) and (c) only, are met the entity may (but is does not have to) elect to separately recognise the intangible asset from goodwill.





(a) The recognition criteria set out in 18.4 are met

(b) The intangible asset arises from contractual or other legal rights


(c) The intangible asset is separable (i.e. capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged either individually or together with a related contract, asset or liability).


FRS 102 (March 2018) paragaph 1.19 clarifies that an entity shall apply any change to accounting policy arising from the Triennial Review 2017 amendments to paragraph 18.8 prospectively (i.e. it shall not restate comparative information), and therefore shall not subsume intangible assets that previously have been separately recognised within goodwill.

Software and website development costs

FRS 102 has no specific requirements in respect of software development or website development costs. As such, the general principles of Sections 17 and 18 should be applied.

For example, if a piece of software is developed purely to enable a piece of hardware to function in the manner intended, it could be argued that this software is part of the directly attributable costs of the underlying hardware and should be included in the cost of the tangible fixed asset.

However, this is frequently not the case. Where software is developed – or a website created – with any other purpose, it would seem most appropriate to apply the requirements of Section 18 in relation to internally developed intangible assets.

Guidance on the criteria for capitalising website development costs is available in the helpsheet Can I capitalise website development costs under FRS 102?.

Useful life and amortisation

FRS 102 requires that intangible assets are carried either under the cost model (i.e. at cost less any accumulated amortisation and any accumulated impairment losses) or under the revaluation model (see Revaluation of intangible assets section below).

Under both models amortisation must be charged and this amortisation begins when the intangible asset is available for use, i.e. when it is in the location and condition necessary for it to be usable in the manner intended by management (FRS paragaph 102 18.22).

Maximum useful life

Intangible assets and goodwill can no longer be attributed indefinite useful lives – they must be amortised. There is only a maximum useful life in exceptional circumstances where the useful life cannot otherwise be reliably estimated (FRS 102 paragraph 18.20). In most cases it should be possible to estimate the useful life of an intangible asset or of goodwill. Where it is not possible, the maximum useful life will depend on the version of FRS 102 being applied.

  • FRS 102 as published in August 2014 states a maximum useful life of 5 years.
  • FRS 102 as published in September 2015 raised the maximum useful life to 10 years. This has not been amended in the March 2018 version of FRS 102.

Residual value

FRS 102 paragraph 18.23 states that an entity shall assume that the residual value of an intangible asset is zero unless:

  • a third party has committed to purchase the asset at the end of its useful life; or
  • there is an active market for the asset from which the residual value can be determined and it is probable that such a market will be in existence at the end of the asset’s useful life.

Revaluation of intangible assets

In theory, it is possible to apply the revaluation model to intangible assets other than goodwill. Whilst it is rarely feasible in practice, it may be an option for some intangible assets, for example fishing quotas or taxi licences. Further consideration of this issue can be found in the helpsheet Can I revalue intangible assets under FRS 102?.

If in doubt seek advice

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.

Terms and conditions

© ICAEW 2023  All rights reserved.

ICAEW cannot accept responsibility for any person acting or refraining to act as a result of any material contained in this helpsheet. This helpsheet is designed to alert members to an important issue of general application. It is not intended to be a definitive statement covering all aspects but is a brief comment on a specific point.

ICAEW members have permission to use and reproduce this helpsheet on the following conditions:

  • This permission is strictly limited to ICAEW members only who are using the helpsheet for guidance only.
  • The helpsheet is to be reproduced for personal, non-commercial use only and is not for re-distribution.

For further details members are invited to telephone the Technical Advisory Service T +44 (0)1908 248250. The Technical Advisory Service comprises the technical enquiries, ethics advice, anti-money laundering and fraud helplines. For further details visit icaew.com/tas.

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Changelog Anchor
  • Update History
    01 Mar 2017 (12: 00 AM GMT)
    First published
    29 Oct 2021 (02: 00 PM BST)
    Changelog created
    16 Sep 2021 (11: 15 AM BST)
    Helpsheet reviewed, no changes to content.
    12 Aug 2022 (12: 00 AM BST)
    Name changed from Accounting for intangible assets and goodwill under FRS 102, reviewed - no change to technical content.