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4.4 Complementary intangible assets and grouping of other intangibles
Publication date: 15 Jun 2023
us Business combinations guide
Separate intangible assets often work together or complement each other. In some cases, an acquirer may wish to group complementary intangible assets together for purposes of measuring their initial fair value at the acquisition date and for subsequent amortization and impairment testing. An example is a brand or brand names.
A brand is a general marketing term that refers to a group of complementary intangible assets, such as a trademark and its related trade name, formula, recipe, and technology. If the assets that make up that group meet the criteria for separate recognition and have similar useful lives, an acquirer is not precluded from recognizing them as a single intangible asset in accordance with ASC 805-20-55-18.
An acquirer may also recognize other groups of complementary intangible assets as a single asset if the underlying component assets have similar useful lives. Examples of assets that may be recognized as a single asset if the useful lives are similar include:
- A nuclear power plant and the license to operate the plant
- A copyright intangible asset and any related assignments or license agreements
- A series of easements that support a gas pipeline
- A group of permits issued by governmental agencies, all of which are required to operate a single facility
In making this assessment, the acquirer would identify the component assets and determine each component asset’s useful life to evaluate whether such lives are similar.
An acquirer should also consider other factors in determining whether the component assets should be combined as a single asset. ASC 350-30-35 addresses when separately recognized indefinite-lived intangible assets should be combined into a single unit of accounting for purposes of impairment testing, and provides a list of factors to be considered. See BCG 8 for further information. In accordance with ASC 350-30-35, separately recorded indefinite-lived intangible assets should be combined into a single unit for accounting purposes if those assets are operated as a single asset and, as such, are essentially inseparable from one another. Although this guidance applies to grouping of assets for impairment testing purposes, it may be useful in determining whether acquired complementary assets should be grouped as of the acquisition date.
PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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