Notes for P&L

Note 14 Intangible assets

Accounting policy

Intangible assets are recognized at cost after deduction of accumulated amortization and potential impairment.

Research and development

Development expenditure, aimed at achieving new or improved products or processes, is recognized as an asset in the statement of financial position, if the product or process is technically and commercially viable, and the company has sufficient resources to complete the development process and subsequently use or sell the intangible asset.

The carrying amount includes directly attributable expenses, such as materials and services used and consumed in connection with processing and registering legal rights. Other development expenditure is recognized in profit or loss for the year as an expense when it arises.

As all development originates in products and market demand, there are no research expenses.

Patents

Acquired patents are capitalized as intangible assets.

Goodwill

Goodwill is recognized as an intangible asset with indefinite useful life. Over and above indication, non-amortizable assets such as goodwill are subject to annual impairment tests by measuring the asset’s recoverable amount. If the estimated recoverable amount is less than the carrying amount, the asset is impaired to its recoverable amount.

Depreciation and impairment

Amortization is recognized in profit or loss for the year on a straight-line basis over the estimated useful lives of intangible assets, unless such useful lives are indefinite. Useful lives are determined on the basis of expected commercial potential, earnings and the patent’s remaining term of validity and technical significance. Useful lives are reviewed at least yearly. Intangible assets with definite useful lives are amortized from the date when they are available for use. Amortizable assets are tested for impairment, if at the reporting date, there is an indication that a non-current asset is impaired. Intangible assets with an indefinite useful life or that are not ready for use are tested for impairment every year and as soon as there is an indication of impairment. The recoverable amount of goodwill is measured through a value in use measurement according to the discounted cash flow method. An impairment loss is recognized when an asset’s carrying amount exceeds its recoverable amount. An impairment loss is recognized as an expense in profit or loss.

Estimated useful lives are:

Products: 1.5-4 years
Platforms: 1.5-10 years
Customer relations: 10 years
Patents: 4-5 years

Useful lives are reviewed yearly.

Management determines estimated useful lives based on three factors: the pace of market and competitive development, the rate of technological change, and the duration of expected earnings potential. These factors are assessed at least annually and adjusted when warranted.

Products (1.5–4 years): Individual product iterations have a short earnings window before being superseded by newer technology. The range reflects the speed at which competitors introduce alternative solutions.

Platforms (1.5–10 years): Platforms such as AllKey serve as foundational architecture for multiple product generations, supporting a longer lifespan. The 10-year upper bound reflects core biometric algorithms that remain technically significant and commercially viable over an extended period.

Customer relations (10 years): Reflects the integration stickiness of biometric solutions once embedded in a customer’s ecosystem. Industry experience confirms that high-security technology supply relationships typically persist over this duration.

Patents (4–5 years): Although patents carry longer legal terms, amortization is based on the shorter period of technical significance. In the digital identity sector, patented technology is typically rendered obsolete by new advancements well before legal expiry.

Estimates and judgments

Capitalized development expenses

The company reports development costs in accordance with IFRS, primarily IAS 38 Intangible Assets. Research expenditures are expensed as they are incurred. Development expenditures are capitalized when the criteria under IAS 38 are met, which includes that the asset is deemed technically feasible and expected to generate future economic benefits. Capitalization applies only to general product development where an identifiable future revenue stream exists. Capitalization begins after the completion of the investigation phase, when the feasibility of the project has been established. In addition, for capitalization to occur, the total development costs for the project must exceed SEK 1 million. The capitalized development costs mainly consist of personnel costs directly attributable to the development work. To a limited extent, costs for materials and other directly attributable expenses may also be included.

Customer-specific development, platform research, new technology exploration, and customer support activities do not meet the capitalization criteria and are expensed as incurred.

Following the wind-down of Mobile and PC operations, the Group’s development organization is materially smaller, with R&D resources concentrated on targeted, shorter-cycle projects aligned with available investment funding. As a result, a larger proportion of development expenditure falls below the SEK 1 million capitalization threshold and is expensed as incurred.

Impairment of goodwill and other acquired intangible fixed assets

The impairment test of goodwill and other acquired intangible fixed assets for the cash-generating unit, Delta ID Inc., has been calculated based on its value in use. The value in use is calculated as the present value of future expected cash flows according to management’s forecast. The most important assumptions in the forecast are sales and operating margin as well as the discount rate.

A five-year cash flow forecast has been used. Sales have been assessed in the short term based on an existing pipeline of identified customers, in the medium term based on management’s assessment of the directly addressable market for iris recognition technology, and in the long term based on assumptions of a normalized growth rate.

The 2025 valuation is supported by the commercialization of iris technology, validated by the licensing agreement with Smart Eye announced in January 2025 for a total consideration of SEK 50 million over five years. Under the capital-light IP licensing model, the partner assumes technical and commercial responsibility, resulting in minimal ongoing cost to the Group. This model underpins the forecast cash flow projections. The model is supported by the identified pipeline of further licensing opportunities.

During the forecast period, a compound annual revenue growth rate of 34 percent has been estimated. The operating margin is forecast at an average of 76 percent, reflecting the capital-light IP licensing model. After the end of the forecast period, a growth rate of 2 percent has been assumed. The discount rate has been assessed based on the business’s estimated weighted average cost of capital (WACC). WACC is estimated at 17.3 percent.

The assessment concluded that the recoverable amount exceeds the carrying amount. No goodwill impairment was recognized for 2025.

Impairment of capitalized development expenditure

For capitalized development expenditures, no indication has been identified and thus no impairment testing has been performed for capitalized development expenditures.

The impairment of patent

For patents, no indication has been identified and thus no impairment testing has been performed for patents.

Sensitivity analysis 

A sensitivity analysis shows that, for goodwill and other acquired intangible assets, neither a 2 percentage-point increase in WACC nor a 20-percent reduction in revenue or operating profit would give rise to any impairment.

Impairment test of goodwill and other acquired assets

Depreciation and write-downs are included in the following lines in the statement of comprehensive income