Intangible Capital and Productivity

Question: Discuss about the Intangible Capital and Productivity. Answer: Introduction Organization is accompanied with several activities in which various functions are performed. This report is consisted with several accounting standards which provide what entries to be made by organization for research and development cost. This report provides about the factors which should be considered by board of directors for making adjustment and passing entries for intangible assets. However, Valuation of goodwill could not be made in the financial statement of organizations due to its fluctuation of amount. There are several principles which could be used by board of directors of Oregan NV for passing the journal entries for research and development cost (Ciftci, Darrough,Mashruwala, 2014). SSAP 13 gives guidance on the accounting policies to be followed in respect of research and development expenditure. These standards provide categories and specify the accounting policies that must be followed for each pure and applied research of Oregan NV(Vetoshkina,Tukhvatullin, 2014). Expenditure on pure and applied research of Oregan NVshould be written off in the same years through the profit and loss account. Development expenditure of Oregan NV should be written off in the year of expenditure except in certain defined circumstance. This expenditure should be capitalized only if the assets purchased or developed are generating the future economic benefits. Accounting team indulged in research and development department could be measured reliable (Bontempi,Mairesse, 2015). Accounting for research and development cost Journal entries Date Particular Amount 000 2011 Profit and loss account Dr To Research and development cost ( Transferring money in research and development cost) 50 50 2011 Plant and machinery To Banks ( Buying new fixed assets) 150 150 2011 Plant and machinery account Dr To Bank (Buying new fixed assets) 2500 2500 2011 Plant and machinery account Dr To Bank (Buying new fixed assets) 300 300 2011 Depreciation account Dr To Plant and machinery ( Charging depreciation) 300 300 2011 Profit and loss account Dr To Depreciation (Charging depreciation from Profit and loss account) 300 300 2012 Depreciation account Dr To Plant and machinery (Charging depreciation from Profit and loss account) 300 300 2012 Profit and loss account Dr To Depreciation (Charging depreciation from Profit and loss account) 300 300 2013 Depreciation account Dr To Plant and machinery (Charging depreciation from Profit and loss account) 300 300 2013 Profit and loss account Dr To Depreciation (Charging depreciation from Profit and loss account) 300 300 2014 Depreciation account Dr To Plant and machinery (Charging depreciation from Profit and loss account) 300 300 2014 Profit and loss account Dr To Depreciation (Charging depreciation from Profit and loss account) 300 300 2015 Depreciation account Dr To Plant and machinery (Charging depreciation from Profit and loss account) 300 300 2015 Profit and loss account Dr To Depreciation (Charging depreciation from Profit and loss account) 300 300 2016 Depreciation account Dr To Plant and machinery (Charging depreciation from Profit and loss account) 300 300 2016 Profit and loss account Dr To Depreciation (Charging depreciation from Profit and loss account) 300 300 2017 Depreciation account Dr To Plant and machinery (Charging depreciation from Profit and loss account) 300 300 2017 Profit and loss account Dr To Depreciation (Charging depreciation from Profit and loss account) 300 300 Factors need to be taken into account There are following factors need to be taken into account while assessing each research and development project for accounting purpose by the accountant of Oregan NV. As per the IFRS standard given Intangible assets of Oregan NVshould be capable of being sold, transferred, lice sensed either individual or with other contracts. Or these assets could be aroused out of legal or contractual rights of the organizations. Intangible assets should be recognized only when it is probable that future benefits to the organizations would arise consistently. Cost of these assets could be measured reliably Pure research cost would be recognized in Profit and loss account Cost of developed phase expenses would be capitalized in assets account or capital account of the organizations. Disclosure which would be made in published account of company Oregan NV needs to make disclosure regarding classification of expenses such as research cost would be recognized in Profit and loss account. Oregan NV should also disclose the life of the assets and other expenses which have been capitalized in assets account or capital account of the organizations. There would be disclosure of net exchange difference which is arising on the transactions of the financial statements into the presenting currency (Napier, 2014). In this case an adamantine study has been prepared on branding of accounting. It is observed that valuation of brand is complex due to its variation in itsfair value. It has been observed in the given case that company want to books its brand value in its financial statement. However, there are several improvements which have been made in accounting practice but determining the homegrown goodwill value is not possible due to its changing amount. Valuation of branding is completely depended on the market conditions and other internal and external factors of an organization. In this case, Management department of organization have presented their view to book brand value in the financial statement in order to depict the true and fair value of its assets. As per the IAS 38 it is evaluated that company could not pass any entries for valuing its homegrown assets but it could go for valuing its purchased goodwill by adding amount equal to brand value on the assets side. Management department of organization needs to understand that brands are intangible assets so they are not sold and bought for a defined amount. They have no market value until they are sold in the market (Vetoshkina, Tukhvatullin, 2014). In this case, there are two cases to establish brand either to homegrown it or to purchase it. Brand of organizations could be bifurcated into two parts homegrown brand image and acquired brand image. In the given case it is given that company could make valuation of its both brands either acquired one and homegrown. As per the understanding developed by reading the Australian accounting standard it is observed that acquired brand image can be booked in the financial statement of company. It could show its brand value amount which it paid beyond the net assets value of Target Company. This different amount could be shown as goodwill in the assets side of acquirer Company. Company could amortize its goodwill throughout its life (Datta,Fuad, 2017). Purchased brand In this given case, it is observed that management department of organization want to book entries for its whole brand value as pet the practice adopted by Rank Hovis Mc Dougall. It is evaluated that RHM could only book value of purchased brand and it would be incorrect to book the value for homegrown brands. Accounting of brand purchased by company should be done by increasing its assets side from the difference amount which it paid to acquire Target Company beyond its capital assets. If companies book the value of its acquired brand image then it would surely deplete the value of its equity share due to the booking of capital reserve on the liabilities side. In addition to the following entries would be passed. All assets account should be put on the debit side, all liabilities on credit side. After that if assets side is less as compare to liabilities side then goodwill would be booked with the same amount This is the brand which is created by the business throughout its business functioning. Company could not estimate its exact brand value. In the given problem, management department want to pass an accounting entry for brand value. It is evaluated that it is impossible for the organizations to create exact value for passing accounting entries in financial statements. In addition to this, homegrown brand value can only be estimated when whole of the business is sold in the market. Apple bought a small startup business by paying more money than its brand worth. However, company could not be able to pass entries for booking brand value of organization. Even if its accountants were to account for brand value on the financial statements, their estimates could be still incorrect. In addition to this, it becomes cumbersome for Apple to estimate its home grown brand image. In the end Apple decided to mark only its purchased brand value in its financial statement and homegrown goodwill will not be booked due to its incorrect (Nurnberg, 2014). Conclusion In this report various facts and figures have been identified on the accounting entries for intangible assets. It becomes hard for an accountant to book value for the brand image of the organizations. It is provided that Organizations should not pass entries in its financial statement for its homegrown goodwill amount. Now in the end it would be inferred that valuation of intangible assets would be done as per the IFRS 38 and other international accounting standards as given. References Bontempi, M.E. Mairesse, J., (2015). 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