Our review of the exposure draft for a new Canadian Intangible Assets standard (the “ED”) suggests that if measurable direct costs are incurred to secure rights-based licenses or quotas, these could potentially qualify as internally generated intangible assets. This could be a positive development, as it provides an opportunity for First Nations Entities to report these assets on their financial statements potentially increasing asset values and improving transparency. We are glad to see that retroactive application is not required, which helps avoid the administrative and financial burden of reassessing historical transactions or restating prior period financial information.
However, there are concerns about tracking eligible costs for capitalization. Rights-related disputes often span years and include significant legal and professional fees, without assurance of a successful outcome. It remains unclear at what point capitalization becomes appropriate, which could lead to inconsistent or contested application and lead to auditor-preparer debate.
We recommend that the PSAB consider whether to prepare application guidance regarding these costs for rights-based licences and quotas.
Read FMB's Letter to PSAB on Intangible Assets Exposure Draft