Show notes

IFRS question 009: Capitalization of a customer list under IFRS

A bank purchased information about subscribers from a telecom company in order to reach its targeted customers via phone, SMS or other advertising medium.

Can the bank recognize the expense incurred to buy this subscriber data as the intangible asset?

The bank expects to generate the future economic benefits from the data since it will get new customers using the data, but the bank does not have the sufficient control over the expected economic benefits.

The reason is that the bank can’t guarantee sales from the customers as they can decide not to buy the bank’s products.

Therefore, shouldn’t the bank just expense the data as a part of our advertising activities? Normally, the advertising activities cannot be capitalized.

IFRS answer 009

The short answer is – YES, in the circumstances described in the question, you actually CAN capitalize the subscriber information – in other words – the customer list.


Let’s split this issue into 2 separate questions:

  1. Is the purchased customer list an intangible asset at all?
  2. Can we capitalize that intangible asset?

So, let’s answer one by one.


1. Is a purchased customer list an intangible asset?

IAS 38 says that the intangible asset is an identifiable, non-monetary asset without physical substance.

IAS 38 Intangible assets

Clearly, customer list has no physical substance and is non-monetary, but is it identifiable?

Again, under IAS 38, an asset is identifiable if it is separable – so you can separate it or detach it from the entity and you can actually sell it, transfer it, license it, rent it or do whatever you like.

Also, assets arising from contractual rights can be separable, too.

If you purchase the customer list, is this separable?

Oh yes, it is –the seller was a telecom company, and it was clearly able to put this list up, separate it and sell it to the bank.

So yes, this customer list is identifiable.

Here let me warn you that the customer list must contain identification details of the subscribers in order to target them directly.

It’s not a mere description of the specific groups, it is the list of specific names, numbers, contact details etc.

OK, so we have the answer to the first question – a customer list is definitely an intangible asset, because it is identifiable non-monetary asset without physical substance.

One more note: the question asked if the customer list is just like advertising activities, some campaign or promotion.

No, it is not.

The difference is exactly the separability – you can separate the customer list and sell it to someone else, but you cannot do the same with your advertising campaign – so, an advertising campaign is NOT an asset, but the customer list is.

Finally, we should be aware that an entity should have control of the asset, in this case I assume that nothing prevents the buyer to control the use of purchased customer list.

Now, let’s tackle the second question:


Can we capitalize the customer list?

IAS 38 says that you can capitalize the intangible asset only if:

  • The future economic benefits are expected to flow to the entity from the use of that asset, and
  • The cost can be reliably measured.

Does the buyer of a customer list expect the future economic benefits?

Yes, of course, otherwise she would not have bought that list. The question said that the bank expected to get new customers.


Please remember that the standard does NOT ask you to quantify these benefits or measure the future economic benefits. It’s almost impossible.

Also, you should not expect to control these future economic benefits – that’s also rarely possible.

So, the bank expects future economic benefits from the use of the purchased customer list and thus this criterion is met.

Can the cost of purchased customer list be measured reliably?

Yes, of course – the buyer knows how much she paid for the customer list.

Just be careful because you cannot capitalize the customer list that you generated internally – or the list of customers that you acquired yourself by collecting the data about them.

The reason is that the cost cannot be measured reliably in this case.

You just cannot distinguish the cost of such a customer list from the cost of running your business, can you?

This is also truth about the subsequent expenditures related to purchased customer list – you cannot capitalize them.

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