Intangible Assets

FASAB Contact: Josh R. Williams, williamsjr@fasab.gov, 202-512-4051

Project Objective:

The Board initially considered intangible assets as part of the now archived software licenses project. Members decided to archive the software licenses project due to the breadth of guidance potentially needed to address intangible assets. This project began as a research topic in which staff worked with a task force to research the significance of intangible assets throughout federal reporting entities.

During the research efforts, staff identified potential intangible assets to include patents, trademarks, data sets, and software-based resources. During Board meeting deliberations, members agreed that research indicates a need to update software guidance. The Board also shared staff’s concerns with recognition challenges associated with the other types of identified intangible assets. Research showed that these assets exist throughout federal reporting entities but there are significant concerns with the practicality of measuring and recognizing their value.

Based on research results and deliberations, the Board ultimately approved an intangible assets project with the following objectives.

  1. Develop updates for software reporting guidance
  2. Develop a working definition of intangible assets for the Board’s internal use
  3. Further assess the costs vs. benefits of developing reporting guidance for intangible assets

Staff is currently working with a task force on the first two objectives while the third objective is on standby.   

Intangible Assets Task Force

FASAB formed a task force to assist the Board with the intangible assets project. The Intangible Asset Task Force webpage provides further information on the task force objectives and activities, to include past meeting agendas, minutes, and milestones.

History of Board Deliberations

February 23-24, 2022

Software Technology

At the February meeting, staff presented an issues paper that provided a framework for developing reporting guidance updates for software technology assets. Specifically, the issues paper recommended a scope and project plan for developing updates for software guidance based on specific needs identified during research. The scope consists of four major categories of software resources that staff plans to address individually in the following order:

  1. Cloud service arrangements
  2. Shared services
  3. Internal use software updates
  4. Other software technology

The Board overwhelmingly supported staff’s recommended scope and planned approach. Additionally, members supported staff’s approach of addressing each scope category separately but noted that the categories would ultimately overlap and relate to one another. Staff plans to begin developing an asset guidance framework so that the Board can deliberate whether cloud service arrangements meet the characteristics of an asset in the federal government. 

Briefing Materials – Topic E

Intangible Assets Working Definition

At the February meeting, staff proposed the following non-authoritative definition of intangible assets for the Board’s internal use.

A recognizable intangible asset is a resource that

  • Lacks physical substance
  • Represents a nonmonetary asset
  • Has a useful life greater than two years
  • Is identifiable as a separate asset from the entity
  • Embodies future economic benefits or services
  • The entity controls
  • Has measurable value

Staff also presented various federal resources that theoretically would or would not fall under the proposed definition. The Board overwhelmingly supported the proposed definition. Some members voiced concerns with potential reporting requirements associated with intangible assets that the Board could address in the future if members ultimately approve a project to develop reporting guidance for intangible assets. Staff will review member comments to consider any further edits to the definition.   

Briefing Materials – Topic F

August 24-25, 2021 

At the August meeting, staff offered recommendations for the Board to deliberate how to move forward with an intangible assets project as members considered adding it to the technical agenda. Based on research and Board deliberations from the June meeting, staff recommended dividing the intangible assets project into three objectives with individual timelines and deliverables. After considering and deliberating staff’s recommendations, the Board agreed to add an intangible assets project to the technical agenda with the following objectives.

  1. Develop updates for software reporting guidance
  2. Develop a working definition of intangible assets for the Board’s internal use
  3. Further assess the costs versus benefits of developing reporting guidance for intangible assets

Staff will proceed with the first two objectives while the third objective is on standby for the foreseeable future. The Board generally agreed it is necessary to consider further the costs versus benefits of reporting guidance before deciding whether to develop intangible assets standards. However, the Board mostly agreed that this objective is not as high a priority as the first two due to research indicating that there is not a strong need for intangible asset reporting guidance. Members therefore agreed that it was not yet necessary to commit to a course of action.  

Staff will work with a task force to draft an issue paper to establish a framework for developing updates for software guidance, as well as an outline for a working definition of intangible assets applicable to the federal government. Staff will coordinate with volunteers from the existing research task force but will also seek new volunteers with knowledge of accounting and operational issues about federal information technology to work on the software update objective.  

Briefing Materials – Topic D

June 22-23, 2021

 At the June meeting, staff presented research findings on federal intangible assets to the Board. The presentation highlighted potential intangible assets identified across federal reporting entities from information gathered from the task force survey responses, agency round table discussions, and other research. Staff also proposed a potential definition of intangible assets, potential approaches for scoping future guidance, as well as benefits and concerns with potential financial reporting guidance.

The agenda topic served as an information session and staff requested the Board’s general thoughts and concerns on the research results and associated guidance approaches. The Board agreed with staff that research indicates a need for updates to software guidance. The Board also shared staff’s concerns with potential recognition burdens associated with other types of identified intangible assets and concluded that caution is necessary in moving forward with developing reporting guidance without further considering the costs versus benefits.

The Board did not consider any specific staff proposals during this meeting. Staff plans to propose specific courses of action to the Board during the August meeting, when members deliberate adding an intangible assets project to the technical agenda.

Briefing Materials – Topic D

December 15-16, 2020

At the December meeting, the Board approved the technical plan for the intangible assets research topic. Staff will begin researching the significance of various intangible assets that exist throughout federal agencies. The Board predominantly agreed that this is an important and timely project and agreed with the proposed approach to begin the effort with a broad mindset to consider the spectrum of possibilities and then narrow the scope based on established criteria. Some members expressed the need to be sensitive to the importance of meeting financial statement user needs that current guidance does not already address and cautioned that an overly broad scope could be burdensome to preparers. 

Staff will form a task force to research and consider all of the potential intangible assets throughout federal agencies. The task force will consist of financial statement users, preparers, and auditors, as well as relevant operational and technical experts. 

Briefing materials – TAB E