What components are included in the initial measurement of intangibles?

The initial measurement of intangible assets typically includes costs that are directly attributable to preparing the asset for its intended use. This encompasses the legal and professional fees incurred during the acquisition of the intangible asset, making it a capitalizable cost in the asset's initial valuation.

When you acquire an intangible asset, such as a patent or brand, the costs associated with obtaining that asset—like legal fees for registration, costs for professional advice, or registration fees—are significant since they are necessary to ensure the asset is valid and enforceable. These expenditures directly relate to the acquisition and thus are included in the initial measurement of the intangible asset on the balance sheet.

In contrast, the other options do not represent costs that would be included in the initial measurement of intangibles. For example, costs related to raw materials or advertising expenditures do not directly relate to the intangible asset itself but rather to operational expenses and marketing strategies that may or may not impact the asset's future economic benefits. Similarly, depreciation is a method used for allocating the cost of a tangible asset over its useful life, and it is not relevant for an intangible asset's initial measurement. Therefore, focusing on costs essential for the acquisition ensures a more accurate valuation of intangible assets on the financial statements.