The revaluation of intangible assets Article by Mr. Stefano Conti and Mr. Enrico Sangalli

By January 12, 2022 No Comments
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An item that often qualifies the financial statements, especially of the “new economy”, is represented by Intangible assets.

The Italian Accounting Board, in some ways intuitively, defines them as those assets that are characterized by intangibility which does not exhaust their usefulness in a single year, but which, conversely, participates in the production process for several years.

Intangible assets can be recognized in the financial statements only if they satisfy both of the following characteristics: i) they must be independently identifiable; ii) the cost must be attributed with sufficient reliability. Basically, they must be autonomously exploitable with a non-arbitrary process.

They usually represent legally protected rights that can be sold or transferred individually.

The legislator, in art. 2426, tells us that they must be entered at cost or production value. For those purchased for consideration, the relative documents (contracts, invoices, etc.) will prevail, in the case of internal production it will be necessary to draw up a statement of the costs incurred, well organized and objectively demonstrable. Purchases following extraordinary transactions are often supported by appraisals which certify the subsequent book value in the financial statements.

At the end of the financial year, in the event of permanent losses in value, the Executives must proceed with the relative diminishing.

Like all assets, even intangible assets cannot be subject to arbitrary revaluations that are not provided for by specific legislative provisions.

In compliance with this framework, intangible assets can be revalued up to their recoverable value, intended, the latter, as the lowest between the value in use and the fair value. In this context, the responsibilities of the Executives are relevant and should be supported by objective evidence. Useful may be expert reports from third parties, qualified and having the appropriate knowledge.

The last rule that allowed the revaluation of business assets was the Legislative Decree no. 104 of August 14th 2020. Also in this case, as in the previous ones, the normative board refers, with few variations, to law no. 342/2000.

The revaluation, as disciplined, could be carried out with an exclusive statutory value or even with fiscal relevance by paying the substitute tax of 3% on the higher values ​​recorded.

It is still possible, even today, to carry out the revaluation of existing business assets in the financial statements as of December 31st 2019, with exclusive civil law effects, in the preparation of the financial statements for the second subsequent year, that is, for solar subjects, the 2021 financial statements.

In ordinary accounting companies that have also revalued tax, a reserve in suspension of tax has emerged for the amount of the higher values ​​recorded. The positive balance of the reserve could be released by paying an additional 10% at the end of the latent tax burden on the company, thus freeing the reserve.

The 2022 budget bill has recently intervened, reducing the appeal of the tax effects of the revaluation carried out on intangible assets that can be amortized for eighteenths, i.e. trademarks and goodwill. For these assets, the tax amortization period was extended to fifty years. It is possible to avoid this penalty by paying the substitute tax provided for by art. 176 TUIR, net of the 3% already paid, or by revoking the original revaluation carried out with methods and terms that will be established by a provision of the Revenue Agency.

The next months, preparatory to the 2021 financial statements, will therefore be crucial to recreate the perimeter of intangible assets (and not only): i) it will be necessary to evaluate the opportunity to proceed with the revaluation, even if only statutory, of the assets with evident effects on the corporate assets ii) where the tax revaluation of trademarks and goodwill has been made, it will be necessary to evaluate the opportunities available to limit the negative effects of the tightening established by the 2022 budget bill on the amortization period.

In this context, the responsibilities of Executives and the Control Boards on the values ​​recorded should not be forgotten, especially considering the heavy pandemic period that could lead to exacerbating suffering financial statements avoiding due devaluations or bringing revaluations to values ​​which exceed the recoverable value.