When is an identifiable asset recognized separately?

An identifiable asset is recognized separately when it meets both separability and contractual-legal criteria. This is a fundamental principle in accounting and business valuation. Separability refers to the ability of the asset to be separated from the entity and sold, transferred, licensed, rented, or exchanged, either individually or in combination with a related contract, asset, or liability. The contractual-legal criterion pertains to whether the asset arises from contractual rights or other legal rights that can be legally enforced.

Together, these criteria ensure that the asset is not just a theoretical concept but has identifiable value that can be appraised and recognized for its contribution to a company's overall worth. This is particularly important in business valuations, where distinguishing between various forms of assets – identifiable or not – can significantly impact the final valuation figures.

In contrast, valuation by an external party, tangibility, and documentation in company records do not inherently determine whether an asset can be recognized separately. An asset can be internally generated and still be considered identifiable if it meets the key criteria, illustrating that the essence of recognition is based more on legal and separable characteristics than on external validation or physical presence.