To reach targeted customers by phone, SMS, or any other advertising medium, a bank bought subscriber information from a telecom company. Is the bank allowed to recognize this expense as an intangible asset? Although the bank anticipates that the data will generate future economic benefits, it does not have sufficient control over these expected benefits.
This is because the bank cannot guarantee sales to customers, but they have the option of not buying bank products. Should the bank not just expense data as part of its advertising activities? Normally, audit firms in Dubai do not capitalize advertising activities.
In this instance, company audit specialists can capitalize subscriber information.
Why?
Let's break this issue down into two separate questions:
Is the customer list purchasing an intangible asset?
Is it possible to capitalize an intangible asset
Let’s handle each question one by one
- Is a customer list purchased an intangible asset or a tangible one?
IAS 38 states that an intangible asset can be defined as an identifiable, non-monetary asset that lacks physical substance. Although customer lists are not physical and non-monetary, they can be identified. IAS 38 states that assets are identifiable when they can be separated. This means companies in Dubai, UAE can sell, license, lease, rent, or transfer them. Assets arising out of contractual rights can also be separable.
Is It Possible to Separate the Customer List If a Dubai Entity Purchases It?
Yes, it is possible to separate the customer list. The seller was a telecom firm, which was clearly able put the list together, separate it, and then sell it to the bank. This customer list can be identified.
We would love to note that, the customer list must include identification details for subscribers to allow them to be targeted directly. It is not just a description of the groups; it is the list with specific names, numbers and contact details. Since we know the answer to the first question: A customer list is an intangible asset because it can be identified as a non-monetary asset that lacks physical substance.
One other thing: The question asks if the customer's list is like any advertising activity, campaign or promotion. It isn't. The key difference is the separability. A company in UAE can sell your customer list separately, but not your advertising campaign. Advertising campaigns are an asset, while customer lists are.
Audit services in Dubai should also be aware of the fact that an entity should control the asset. In this instance, I assume that the buyer can control the customer list.
Jumping on the second question: Is it possible to capitalize on the customer list?
IAS 38 states that the intangible asset can only be capitalized if:
- Future economic benefits are expected from the asset's use.
- It is possible to accurately measure the cost.
Is The Customer List Buyer Expecting Future Economic Benefits?
The Dubai firm would have purchased that list if they didn't know. According to the question, the bank was expecting new customers. The standard does not require financial audit teams to quantify these benefits, or measure future economic benefits. It is almost impossible.
Audit services department should also not assume that you can control future economic benefits. This is often impossible. The bank therefore expects future economic benefit from the purchase of customer lists and this criterion has been met.
Is It Possible to Measure the Cost of a Customer List Purchased?
Yes, the buyer does know how much the entity paid to get the customer list. Internal auditor can't capitalize customer lists that you have generated internally or those that you acquire by collecting data. This is because the cost can't be reliably measured in this instance. It is impossible to tell the difference between the cost of a customer list and the cost of running your business.
Companies, through their company audit experts cannot capitalize the expenses incurred after they have purchased customers.
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