FRS 102 governs the accounting treatment of intangible assets. These assets, lacking physical substance, represent rights or privileges that generate future economic benefits. Examples include patents, trademarks, and certain development costs. The question of their maximum life is crucial for determining the appropriate amortization period.
The determination of useful life impacts financial statements significantly. A shorter life leads to higher amortization expense, reducing profits in the short term but potentially providing a more conservative view of long-term value. Conversely, a longer life spreads the expense over more years, boosting near-term profits but potentially overstating the asset’s true worth. The historical context shows a trend toward rigorous assessment and justification of useful lives, reflecting increased scrutiny from regulators and investors.
