Chapter 10

Chapter 10 - Chapter 10 The Nature of Intangible Assets 1....

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Chapter 10 The Nature of Intangible Assets 1. Intangible Assets – no physical substance but do have value based on rights, privileges, or advantages coming to or belonging to owner; often granted/protected by government 2. Trademark – federally registered word, phrase, symbol, or design that identifies source and quality of particular good or service; exclude others using same trademark or one that’s confusingly similar for indefinite period time. Govt provides protection for 10 years but may renew applic. indefinitely 3. Patent – exclusive right granted by def. govt. to make specific product or use process w/o competition for period of years. a. Utility patents: granted to who invents, discovers, or improves; expire 20 years after filing b. Design patents: to who has invented new, original, ornamental design for product; expire 14 years from grant date. c. Copyright: exclusive right granted by FED to publish and sell literary, musical, or other artistic materials for period or author’s life + 70 yrs 4. Owner’s can control and be rewarded through liscensing and royalty agreements allowing others to use; encourages further innovation 5. Investments in intangs: research and development resulting in patents, etc OR cultivation of customer lists and marketing info. 6. Five Categories of Intangibles * useful life: length of time during which can be expected to perform function a. Marketing-Related : allow co to promote self or products; includes trademarks, tradenames, package designs, domain names, noncompete agreements i. Protected by legal stnrds, allow to sue if copying occurs (enough key elements to cloud identity of unique product) ii. Varying useful life: trademark [indefinite], noncompete [dep. on contract b/t employee and employer (limited life)] b. Customer-Related : provide benefits to co by allowing it to sell, lease, exchge info about it custs; includes cust lists, cust relatnships, and contracts i. Cust list useful life not limited by legal, but is limited by usefulnes c. Artistic-Related : protected by copyrights granted by gov to creators of original artistic works (plays, operas, ballets, images, photos, movies); owners allowed specific right to reproduce, copy and perform art. work for profit i. Copyrights have useful lives = artist life + 70years d. Contract-Related: based on legal agreements b/t 2 parties to perform specific duties; licensing and royalty contracts, construction permits, franchise agreements, employment contracts, broadcast rights, ALSO timber, drilling, mining, water rights i. Useful lifes = set forth in contracts created
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e. Technology-Based: such as patents, trade secrets, computer databases, software; provide value to co’s through legal or contractual protection i. Trade secrets and databases would normally be amortized over useful lives; however, if no factors limit their useful lifes, can be considered indefinite Initial Measurement of Intangible Asset 1. Valuing Intangible Asset Purchased from OUTSIDE SOURCE
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This note was uploaded on 03/31/2008 for the course ACC 310 taught by Professor Thomas during the Spring '08 term at N.C. State.

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Chapter 10 - Chapter 10 The Nature of Intangible Assets 1....

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