In the practice of fast-growing companies – especially in the digital sector – we increasingly see transactions where newly established entities acquire intangible assets: trademarks, domains, production formulas, marketing materials, and copyrights. At first glance, these assets appear “everlasting.” They do not physically wear out, they do not break, and often even increase in value over time.
But what does accounting say in Bulgaria?
National Accounting Standards vs. “Business Logic”
According to the Bulgarian National Accounting Standards (NAS), the approach is clear:
There are no intangible assets with an indefinite useful life
This is a key difference compared to international practice under IFRS, where under certain conditions an asset may be considered to have an indefinite useful life and therefore not be amortized.
In Bulgaria – even if an asset appears “everlasting” it must be amortized.
Why Amortize If There Is No Physical Wear?
This is where a deeper understanding of value comes in.
Intangible assets do not physically deteriorate, but they are subject to:
1. Economic (Moral) Obsolescence
- Marketing materials lose relevance
- Formulas may be replaced by more innovative solutions
- Brand positioning evolves over time
2. Legal Limitations
- Trademarks have protection periods
- Copyrights and licenses are often time-bound
- Domains require periodic renewal
In other words their value is not eternal, even if it is not physically limited.
How Is the Amortization Period Determined?
The company must make a reasonable and well-supported estimate, based on:
- Expected period of use
- Legal protection term
- Market dynamics and technological change
- The company’s business strategy
💡 For example:
- Trademark → often 5–10 years
- Marketing materials → 2–5 years
- Formulas / know-how → aligned with the product lifecycle
A Common Mistake Among Startups
Many startups and digital businesses do the following:
👉 Capitalize intangible assets…
👉 …but do not amortize them because they believe they have “no end”
This leads to:
- Overstated assets on the balance sheet
- Distorted profit figures
- Potential risks during audits or tax inspections
What Does This Mean for Your Business?
If you are acquiring:
- a brand
- intellectual property (IP)
- digital assets
- know-how
You need to consider not only their value, but also:
- proper accounting treatment
- a realistic amortization plan
- the tax impact on profit
Conclusion
Intangible assets are among the most valuable assets in modern business.
But precisely because they are “invisible,” they are often misunderstood and mismanaged.
In Bulgaria, the rule is clear – all intangible assets must be amortized.
The real question is not whether, but how. If you work with such assets or are structuring a company around intellectual property, the right accounting approach can make a significant difference – not only for your financial results, but also for future investment or exit opportunities.
