Note 9. Intangible Assets

Intangible assets comprise the following:


(in millions)	2011			2010
Gross cost
– Ethyl	$	22.1		$	22.1
– Technology		7.1			7.1
– Customer relationships		16.0			16.0
– Patents		2.9			2.9
– Internally developed software and other costs		3.1			0.0

		51.2			48.1

Accumulated amortization
– Ethyl		(15.0	)		(13.1	)
– Technology		(5.3	)		(4.6	)
– Customer relationships		(11.2	)		(9.7	)
– Patents		(2.0	)		(1.7	)
– Internally developed software and other costs		0.0			0.0

		(33.5	)		(29.1	)

	$	17.7		$	19.0

Ethyl

An intangible asset of $28.4 million was recognized in the second quarter of 2007 in respect of Ethyl foregoing their entitlement effective April 1, 2007 to a share of the future income stream under the sales and marketing agreements to market and sell TEL. In 2008, contract provisions no longer deemed necessary of $6.3 million were offset against the intangible asset. The amount attributed to the Octane Additives reporting segment was being amortized straight-line to December 31, 2012 and the amount attributed to the Fuel Specialties reporting segment is being amortized straight-line to December 31, 2017. Effective October 1, 2011, the Company extended its estimate for the future life of the Octane Additives segment from December 31, 2012 to December 31, 2013 and therefore prospectively adjusted the amortization period for the amount attributed to the Octane Additives segment. An amortization expense of $1.9 million was recognized in 2011 (2010 – $2.1 million) in cost of goods sold.

Technology

Following the acquisition of the remaining 50% of Innospec Fuel Specialties LLC on July 8, 2004, the Company recognized an intangible asset of $2.3 million in respect of various technological approvals the business has received from certain military and civilian authorities. The approvals act as a barrier to entry to any potential competitor in the market who would wish to supply these products.

An intangible asset of $4.8 million was recognized in respect of a number of specialized manufacturing processes carried out by Innospec Widnes Limited following the acquisition of that entity in August 2004.

Both of these assets have an expected life of 10 years and are being amortized on a straight-line basis over this period. No residual value is anticipated. An amortization expense of $0.7 million was recognized in 2011 (2010 – $0.7 million) in cost of goods sold.

Customer relationships

Following the acquisition of Finetex (now merged into Innospec Active Chemicals LLC) in January 2005, the Company recognized an intangible asset totaling $7.1 million, $4.2 million of which was in relation to customer lists acquired. This asset has an expected life of 13 years and is being amortized on a straight-line basis over this period. No residual value is anticipated.

Intangible assets were recognized in 2004 in respect of both the Innospec Fuel Specialties LLC ($9.0 million) and Innospec Widnes Limited ($2.8 million) acquisitions, and relate to ongoing customer relationships. These have an expected life of 10 years and are being amortized on a straight-line basis over that period. No residual value is anticipated.

An amortization expense of $1.5 million was recognized in 2011 (2010 – $1.6 million) in selling, general and administrative expenses.

Patents

Following the acquisition of Finetex, the Company recognized an intangible asset of $2.9 million in respect of patents and trademarks. These have an expected life of 10 years and are being amortized on a straight-line basis over that period. An amortization expense of $0.3 million was recognized in 2011 (2010 – $0.3 million) in cost of goods sold.

The aggregate intangible asset amortization expense was $4.4 million, $4.7 million and $4.7 million in 2011, 2010 and 2009, respectively, of which $2.9 million, $3.1 million and $3.1 million, respectively, was recognized in cost of goods sold, and the remainder was recognized in selling, general and administrative expenses.

Future amortization expense is estimated to be $4.1 million per annum for 2012 and 2013, and $3.0 million per annum for 2014.

Internally developed software and other costs

We are continuing with the implementation of a new, company-wide, information system platform. The platform provider is well established in the market. The implementation will be a phased, risk-managed, site deployment and follow a multistage user acceptance program with the existing platform providing a fallback position. Internally developed software and other costs capitalized at December 31, 2011 were $3.1 million (2010 – $0.0 million). No amortization was recognized in 2011 (2010 – $0.0 million).