Intangible Assets

By Dr Jorge Marcos García Landa, Corporativo García Landa, S.C.

In Latin America, most legal entities have no idea of what their company is worth, which is detrimental to their own company and the legal entities that comprise it.

Several years ago we were familiar with the concept of “Goodwill”, which simply meant knowing what a company was worth. This concept was recorded in the accounts, mainly comprised all the assets owned by the taxpayer, and referred essentially to its portfolio of clients, its inventories, its accounts receivable and its fixed assets, and the most important thing was the market recognition enjoyed by the company, i.e. that its products were recognised and accepted by its clients.

Regarding the recording of “Goodwill” in the accounts, what we certified public accountants traditionally did was to record it under intangible assets with a payment to the share capital.

The above is purely an accounting matter and has no other effect, including for tax purposes. Our country’s Income Tax Law states that a surplus resulting from a revaluation of assets has no tax effects. We recorded the revaluation surplus in the net worth for financial purposes and sometimes, at the suggestion of legal advisors, the share capital was increased. This capitalisation had no tax effects as, when it was applied, the shares had no tax value. However, a company that records its “Goodwill” under intangible assets while also increasing its share capital provides its shareholders with a financial basis in the event of a national or foreign group seeking to buy the company. The above-mentioned accounting practice was applied at the time according to generally accepted accounting principles which are now completely obsolete.

Since 1988 intangible assets have accounted for 78% of the value of the companies valued by Standard & Poor’s. In 1991, Citibank granted a loan of MX 480 million to the company BORDEM (a cheese manufacturer), with the latter furnishing its trademark as a guarantee. Below are several concepts which can be considered to be intangible assets:

  • Trained personnel, technical expertise, quality systems.
  • Undertakings (not to compete).
  • Registered trademarks, patents, rights and names, and franchises.
  • Sales routes, delivery systems, distribution channels.
  • List of clients, distributors, mailing, advertising subscriptions and others. Client database.
  • Customer service capacity, product service support.
  • Agreements (consultancy, sales, licences, royalties).
  • Computing systems.
  • Growth expectations, flow of ideas, business.

Definitions established in the financial system and in Mexican legislation

Intangible assets allow an asset to be enjoyed for a limited period of time shorter than the duration of the legal entity.

Deferred expenses are considered to be intangible assets which allow for the enjoyment or exploitation of assets which are to be deducted as an investment. Mexican legislation permits the investment and, in specific cases, the amortisation of deferred assets. One section of our country’s Income Tax Law defines deferred assets as follows: “These are assets represented by property or rights which make it possible to reduce operating costs, improve the quality or acceptance of a product, use, enjoy or exploit an asset, for a limited period of time shorter than the duration of the legal entity.”

In our country these intangible assets are amortised at an annual rate of 15%. Through accounting and legal procedures, the amount in question may be deductible, thus reducing the basis of assessment.


In order to determine what the value of the intangible assets is, the services of a public commercial broker, registered with the National Register of Securities and Intermediaries, are employed. The broker carries out a valuation and issues a report on the value of the intangible assets so that they can be recorded in the accounts in accordance with the International Financial Reporting Standards (IFRS).

Accounting records

On the basis of the above-mentioned valuation and following the holding of shareholders’ meetings where the shareholders decide to capitalise the outcome of the valuation, the accounting records show the following:
Intangible assets $
Net worth $


It is imperative that all companies acknowledge their intangible assets and thereby present their financial statements in a more reliable manner as, by doing so, they increase their assets and, therefore, their share capital, all of which will serve as a basis for the possible securing of credit, for improving their relationship with customers and suppliers, for public and private bidding, and for the sale of companies, among other such benefits.

Dr Jorge Marcos García Landa

Dr Jorge Marcos García Landa

Corporativo García Landa, S.C., Mexico City, Mexico
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Published: March 2016 l Photo: yuichiro -

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