What is Patent?
A patent is a legally granted exclusive right to make, use, and sell an invention for a fixed period (typically 20 years from filing), recognized as an intangible asset under IAS 38 at the cost of acquisition or successful internal development.
How It Works
- Acquired patents: capitalized at purchase cost plus legal fees.
- Internally developed: capitalize development-phase costs when IAS 38 criteria are met.
- Amortized straight-line over the shorter of legal life and useful life.
- Tested for impairment when indicators arise.
Saudi Context
Saudi patents are issued by SAIP under the GCC Patent Office framework, with a 20-year protection period. Saudi industrial companies (SABIC, Aramco, Maaden) hold significant patent portfolios in petrochemicals and downstream technology, capitalized at the cost of acquisition or successful in-house development and amortized over the remaining legal life.
Example
A Saudi industrial firm acquires a patent for SAR 2,000,000 with 10 years of legal protection remaining. Annual amortization = 2,000,000 / 10 = SAR 200,000.