In accounting, not all trademarks are recognized as intangible assets. Thus, according to para. 5 of Accounting Standards 8 “Intangible assets”, the rights to trademarks are classified as intangible assets. At the same time, expenditure for the creation of trademarks (brand marks) in accordance with para. 9 of Accounting Standards 8 are not recognized as intangible assets. Important issues of expenditure records for trademark creation – in the following.
Accounting
It should be noted that if a company acquired a trademark then it would record the expenditures for its acquisition as an intangible asset with the right to monthly depreciation.
However, in this situation the company creates its own trademark. In this case all expenditures for its creation should be reflected in the expenses of the reporting period when they were incurred. This is emphasized not only by para. 9 of Accounting Standards 8 but also by the relevant provisions of IAS 38 “Intangible Assets”. In particular, paragraphs 63 and 64 of IAS 38 indicate that internally generated brands are not recognized as intangible assets since they cannot be segregated from the expenditures of business development as a whole. Accordingly, if an entity subject to the scope of application of IAS 38 does not meet the definition of an intangible asset, costs for its acquisition or internal generation are recognized as an expense in the period they are incurred (paragraph 10 of IAS 38).
Consequently, the company should attribute all expenses for the development and registration of a trademark to sales expenses and reflect them in the account in the account 93.
Tax accounting
Income tax
As it is known, the object of taxation of income tax is determined by adjusting (increasing or decreasing) the financial result before tax (profit or loss) determined in the financial statements of the company in accordance with the national accounting rules (standards) or international financial reporting standards, on the difference, which arise in accordance with the provisions of the Tax Code of Ukraine (para. 134.1.1 of TCU).
Since no differences in the expenditures of developing and registering a trademark in the TCU are not provided, the financial result to the taxation of income tax is determined by the rules of accounting. Accordingly, accounting expenses will affect the reduction of the object of taxation of the income tax.
VAT
The incoming VAT on the incurred expenses for the creation of a trademark, the company has the right to attribute to a tax credit in the presence of tax invoices registered in the URTI (para. 198.6, 201.10 of TCU). For small expenses, where VAT amount is no more than UAH 40 for one day, the basis for accrual of a tax credit, a cash check serves (para. 201.11 of TCU).
At the same time, the tax credit is accrued irrespective of whether the purchased goods/services with VAT began to be used in taxable transactions within the framework of the economic activity of the company during the reporting tax period, as well as whether it carried out taxable transactions during such accounting tax period (para. 198.3 of TCU).
In addition, the company should not additionally accrue “compensating” tax liabilities with VAT in accordance with para. 198.5 of TCU, since the company plans to use the trademark in taxable VAT transactions within the scope of economic activity.
