The Balance Sheet 183
- Computer soft ware and databases (611323)
- Entertainment, literary, and artistic originals
(611324) - Other intellectual property products (611325).
7.65 Some intellectual property products are used
solely by the unit responsible for their development or
by a single unit to whom the product is transferred.
Mineral exploration and evaluation are an example.
Other products, such as computer soft ware and ar-
tistic originals, are used in two forms. Th e fi rst is the
original copy. Th is is frequently controlled by a single
unit but exceptions exist, as explained in the remain-
der of this section. Th e original is used to make copies
that are, in turn, supplied to other institutional units.
Th e copies may be sold outright or made available
under a license: - A copy sold outright may be treated as a fi xed
asset if it satisfi es the necessary conditions—that
is, it will be used in production for a period in
excess of one year. - A copy made available under a license to use
may also be treated as a fi xed asset if it meets the
necessary conditions—that is, if it is expected to
be used in production for more than one year
and the licensee assumes all the risks and re-
wards of ownership. A good indication, but not a
necessary one, is if the license is purchased with
a single payment for use over a multiyear period. - If the acquisition of a copy with a license to use
is purchased with regular payments over a mul-
tiyear contract and the licensee is judged to have
acquired economic ownership of the copy, then
it should be regarded as the acquisition of a fi xed
asset. - If regular payments are made for a license to use
without a long-term contract, then the payments
are treated as payments for a service. - If there is a large initial payment followed by a se-
ries of smaller payments in succeeding years, the
initial payment is recorded as the net acquisition
of a fi xed asset and the succeeding payments are
treated as payments for a service. - If the license allows the licensee to reproduce the
original and subsequently assume responsibility
for the distribution, support, and maintenance of
these copies, then this is described as a license to
reproduce and should be regarded as the sale of
part or whole of the original to the unit holding
the license to reproduce.
7.66 Research and development (611321) consists
of the value of expenditure on creative work under-
taken on a systematic basis in order to increase the
stock of knowledge, including knowledge of man,
culture, and society, and use of this stock of knowl-
edge to devise new applications. It does not extend
to including human capital as assets within GFS and
other macroeconomic statistics. Th e value of research
and development should be determined in terms of
the economic benefi ts it is expected to provide in
the future. Th is value includes the provision of pub-
lic services in the case of research and development
acquired by government. In principle, research and
development that does not provide an economic ben-
efi t to its owner does not constitute a fi xed asset and
should be treated as an expense. Only research and
development that meets the criteria to be a nonfi nan-
cial asset should be included in this category.^19
7.67 Unless the market value of the research and
development is observed directly, it may, by conven-
tion, be valued at the sum of costs, including the cost
of unsuccessful research and development. More spe-
cifi cally, research and development undertaken by
government units, universities, nonprofi t research in-
stitutes, etc. is nonmarket production and should be
valued on the basis of the total costs incurred, exclud-
ing a return to capital used. Research and develop-
ment expenditure carried out on contract is valued at
the contract price. If carried out on own account, it is
valued as cumulated costs. If it is carried out by a pub-
lic corporation, the costs include a return to capital.
Th ese valuations need to be increased for changes in
prices and reduced because of consumption of fi xed
capital over the life of the asset. With the inclusion
of research and development in the asset boundary,
patented resources are no longer considered as a form
of nonproduced assets.^20(^19) For further guidance on the practical measurement of research
and development, see Organisation for Economic and Co-oper-
ation and Development, Handbook on Deriving Capital Measures
of Intellectual Property Products (Paris, 2010).
(^20) Th e patent agreement is to be seen as the legal agreement con-
cerning the terms on which access by third parties to research and
development is granted. Th e patent agreement is a form of license
to use, which is treated as payments for service or the acquisition
of assets. See discussions on contracts, leases, and licenses (61441)
in paragraph 7.105 and in Appendix 4.