In the text this week you learn how internally generated assets are rarely capitalized. Because of this, many industries have undergone quite complicated legal structures in order to generate a sale of the intangible to allow for capitalization. For example, the pharmacy industry where significant costs go into generating a unique formula through R&D that is then used to gain a patent which will allow for sole distribution. In order to have these costs capitalized, the patent would have to be sold in a hands-length transaction. As such, there are competing priorities of adding relevant and reliable data (what if the patent fails? what revenue can it generate in 5, 10, 20 years?) with matching the costs to the revenue. There is evidence these competing princples are not in equilibrium as you continue to see drastic price fluctuations when the news of a patent approval/rejection is announced (in a perfect market, that information based on best guess scenarios would already have been communicated in the financial statements).

How would you recommend adjusting the priorities in regards to capitalizing internally created intangible assets?