Technology-based Intangible Assets – Other Technology – FAQ | IFRS

Technology-based intangible assets – Other technology

In a Business Combinations, this is a intangible asset and is therefore recognised separately from goodwill, provided that its fair value can be measured reliably. This customer-related intangible asset does not arise from contractual or other legal rights, but meets the definition of an intangible asset because it is separable.

  1. Unpatented technology or know-how Technology-based intangible assets – Other technology

    Know-how and trade secrets are intangible assets owned by almost every organization. While they may be documented in files, drawings, concepts, and archives, such material is usually only a small part of the whole asset. Often described as something “in the head of the workforce,” know-how is an integral component of the people working in an organization.

    One strategy to benefit from know-how in the technology sector which is undertaken quite often is to establish partnerships or to found joint ventures, which allow the resources from several entities to be combined in a new alliance likely to create additional value. In December 2008, Daimler AG and Evonik Industries AG, announced that they established a strategic alliance for the development and production of Lithium-Ion Batteries. Based on lithium-ion technology from Evonik and with Daimler’s expertise, both groups planned to drive forward the research, development and production of battery cells and battery systems in Germany.

    This strategic alliance is considered to represent an important milestone in the production of electric vehicles.

    What Is Know-How? European Commission (EC) Regulation No. 772/2004, relating to technology transfer agreements, defines “know-how” as: a package of non-patented practical information resulting from experience and testing, which is: Technology-based intangible assets – Other technology

    • Secret, that is, not generally known or easily accessible

    • Substantial, that is significant and useful for the production [. ..]. and

    • Identified, that is, described in a sufficiently comprehensive manner so as to make it possible to verify that it fulfils the criteria of secrecy and substantiality

    Thus, know-how is accessible only to a specific, well-known group within an organization and should be subject to protective measures to prevent disclosure. The EC definition is a good description of this type of intangible asset but should be extended, because, in general, economic (trade) secrets are different from technology-based know-how. Typical examples of know-how are: formulas, patent operating parameters, drawings, and other non-patented technologies.

    Representative trade secrets are: pricing and terms from suppliers, customer lists, contracts, names of key personnel, control systems, process descriptions, and financial information (i. e., margins, acquisition costs, sales). Technology-based intangible assets – Other technology

  2. Databases Technology-based intangible assets – Other technology

    Databases are collections of information, often stored in electronic form (such as on computer disks or files). A database that includes original works of authorship may be entitled to copyright protection. If a database acquired in a business combination is protected by copyright, it meets the contractual-legal criterion for identification as an intangible asset. However, a database typically includes information created as a consequence of an entity’s normal operations, such as customer lists, or specialised information such as scientific data or credit information. Databases that are not protected by copyright can be, and often are, exchanged, licensed or leased to others in their entirety or in part. Therefore, even if the future economic benefits from a database do not arise from legal rights, a database acquired in a business combination meets the separability criterion for identification as an intangible asset.

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