acc304_w6_ch12

acc304_w6_ch12 - ACC 304 Week 6: Intangible Assets Slide...

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ACC 304 Week 6: Intangible Assets Slide # Topic Narration 1 Introduction Welcome to Intermediate Accounting Two. In this lesson, we will discuss intangible assets. Please go to slide number 2. 2 Objectives When you complete this lesson, you will be able to: Describe the characteristics of intangible assets; Identify the costs included in the initial valuation of intangible assets; Explain the procedures for amortizing intangible assets; Describe the types of intangible assets; Explain the conceptual issues related to goodwill; Describe the accounting procedures for recording goodwill; Explain the accounting issues related to intangible-asset impairments; Identify the conceptual issues related to research and development costs; Describe the accounting procedures for research and development costs and similar costs; And indicate the presentation of intangible assets and related items. Please go to slide number 3. 3 Intangible Asset Issues Today, we have an economy dominated by information and service providers, and their major assets are often intangible in nature. Intangible assets have two main characteristics. First, they lack physical existence. Intangible assets derive their value from the rights and privileges granted to the company using them. Second, they are not financial instruments. Assets such as bank
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deposits and accounts receivable lack physical substance, but are not classified as intangible assets. These assets derive their value from the right to receive cash in the future. Please go to slide number 4. 4 Intangible Asset Issues, continued Intangibles purchased from another party are recorded at cost. This includes all costs of acquisition and expenditures necessary to make the intangible asset ready for its intended use. If intangibles are acquired for stock or in the exchange of other assets, the cost of the intangible is the fair value of the consideration given or the fair value of the intangible received, whichever is more evident. Essentially, the accounting treatment for purchased intangibles closely parallels that followed for purchased tangible assets. Costs incurred internally to create intangibles are generally expensed as incurred. Even though a company may incur substantial research and development costs to create an intangible, these costs are expensed. The only internal costs capitalized are direct costs incurred in obtaining the intangible asset, such as legal costs. Please go to slide number 5. 5 Intangible Asset Issues, continued Intangibles have either a limited useful life or an indefinite useful life. An intangible asset with a limited life is amortized; one with an indefinite life is not amortized. The expiration of intangible assets is called amortization. Limited-life intangibles should be amortized by systematic
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This note was uploaded on 08/17/2008 for the course ACC 304 taught by Professor Hendren during the Spring '08 term at Strayer.

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acc304_w6_ch12 - ACC 304 Week 6: Intangible Assets Slide...

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