I have been told that in USA, costs associated with the registration application for an internally developed patent should be capitalized. However, para # 10 of "Statement of Financial Accounting Standards No. 142 (Goodwill and Other Intangible Assets)" says : "Costs of internally developing, maintaining, or restoring intangible assets (including goodwill) that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole, shall be recognized as an expense when incurred".

So, why does legal work (in connection with internally developed patent applications) gets capitalized in US?

Because it's directly related to the patent, and only to the patent. i.e. it's "identifiable" as belonging to the patent.

Hello morgaine300, thank you for your answer, which is certainly interesting. However, the sentence from SFAS appears a bit complex : "Costs... that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole, shall be recognized as an expense when incurred".

How can "costs" have "indeterminate lives"? If an asset's indeterminate life is meant instead, the sentence appears ill-constructed. Your views please.

The “indeterminate lives” refers to the actual asset.

So, a cost related to Goodwill for example. Goodwill has no specific end life. It could remain on the books forever.

Just as an added note, I think the sentence is badly constructed, but not for that reason. "Costs" doesn't mean the same thing as expenses. A "cost" is the cost that goes into something, so costs very well can be assets. i.e. the "cost" to buy a machine may include the machine itself, the sales tax, the transportion, etc. Those are all costs, and they all become part of the cost of the asset. Whereas, the "cost" to repair said machine is expensed. If I were to explain which costs are part of the asset and which should be expensed, the word cost is appropriate.

So the sentence is explaining which costs are going to be counted as an expense, as opposed to being counted as part of the cost of the assets. From that point of view, there's nothing wrong with the sentence.

Now, from a confusing, convoluted point of view, yes I think it's badly stated. i.e. how literally do you interpret "or"? But this is par for the course. That's probably why in college they actually teach how to do it, rather than handing out FASB's statements and letting people try to figure it out themselves. :p