Blis' intellectual property write-off 'unusual'

By DANIEL RIORDAN

Blis Technologies' decision to write off all its intellectual property has drawn differing responses from two accounting experts.

Canterbury University senior accounting lecturer Alan Robb said that although it was unusual for a company to write off all its intellectual property in the way Blis had done, it was "totally proper".

Blis, which listed last July, reported an operating loss of $1.9 million for the year to March 31, and wrote off a further $12.4 million, comprising $3 million in intellectual property and $9.4 million in scientific research.

The company said it had changed its accounting policy on recognising intellectual property as an intangible asset. It had written off all patents, trademarks and acquired scientific research. All costs related to creating and acquiring intellectual property had been expensed as incurred.

Chief executive Kelvin Moffatt said the write-off was made so that future profit would be a truer reflection of how the company was doing.

Robb said intangible assets typically had little security value when a company sought to raise debt unless they were legally recognised rights such as patents or trademarks. Intellectual property in the form of "scientific research" would be unlikely to have much security value.

Similarly, it probably had no relevance in determining whether a company met solvency guidelines.

Robb said he agreed completely with Moffatt's comments that the write-off should be made so that future profit would be a truer reflection of how the company was doing.

"It is also a fairer presentation of the financial position of the company and I commend Blis for not following the herd in showing a dubious debit on its balance sheet."

Tony van Zijl, chairman of the Institute of Chartered Accountants Financial Reporting Standards Board, said that although he was not familiar with Blis' situation, on the face of it the actions were unusual.

"In general, if there are reasons to believe the value of the intellectual property is impaired, you would write it down. Otherwise you would continue with your amortisation.

"If you had a building and it burned down and you had no insurance, your shareholders would take that as bad news," said van Zijl. "That's the same as saying your intellectual property's gone."