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Non-current assets of the enterprise

Non-current assets used in the operational activities of an enterprise for a long period and expected to bring future economic benefits to the enterprise belong to non-monetary assets. Intangible assets are assets that do not have a physical form. One of the objects of accounting is intangible assets. They belong to the active part of the enterprise`s accounting balance sheet. Intangible assets belong to the composition of non-current assets. Intangible assets are tools used for revenue generation in production for a long period (more than 1 year) without a physical basis. The following are examples of intangible assets used in the operational activities of the enterprise for a long period and generating revenue:

  • Works of science, literature, and art;
  • Inventions, industrial designs, market knowledge, customer lists, utility models, software, or databases, cinematographic films, trademarks, and service marks (including brand and publication names), breeding achievements, topology of integrated circuits, secret formulas, manufacturing processes (including know-how);
  • Rights to use land areas, natural resources (wealth), patents, franchises, licenses, concessions, and privileges (including licenses granted for specific types of activities);
  • The enterprise`s operational influence, meaning the difference between the company`s total assets and liabilities in the balance sheet with the purchase price (as a real estate complex) (net assets).

The accounting and reporting of intangible assets are carried out in accordance with International Accounting Standard 38 (IAS 38). According to this standard, intangible assets are non-monetary assets that do not have a physical form and can be identified, and they are determined by three measures:

  1. Identification of the intangible asset (determinability); The asset meets the determinability measure only in the following cases:
  • The asset can be separated from the enterprise, also sold, transferred, licensed, or leased individually or in combination with other assets and (or) liabilities, either separately or in combination with other assets and (or) liabilities;
  • Regardless of the possibility of transferring rights to use the asset and its separability from the enterprise or other rights and obligations, income can be generated from contracts and other rights.
  1. Control of the intangible asset by the enterprise;
  2. The intangible asset brings economic benefits to the enterprise in the future.

The conditions for including intangible assets in the Accounting Balance are as follows:

  1. The object must bring economic benefits to the organization in the future (the object should contribute to achieving the organization`s goals by being used in the production of goods and services, meeting management needs, or being used in the organization`s activities).
  2. The organization may have the right to obtain economic benefits, which can be realized in the future by the current object.

The accounting of intangible assets is carried out in accordance with the "Instruction on the Chart of Accounts and Its Application for the Accounting of Enterprises" approved by the Order No. I-94 of the Ministry of Finance of the Republic of Azerbaijan dated October 20, 1995.

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