ADMS3585 Winter 2010 Ch12 slides

ADMS3585 Winter 2010 Ch12 slides - CHAPTER 12...

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C H A P T E R 12 12 Goodwill and Other Intangible Assets
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Topical Coverage Characteristics Initial recognition Measurement subsequent to initial recognition Types of intangibles Special issues Impairment Deferred charges Presentation on balance sheet International comparison
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Characteristics Lacking physical substance Non-financial assets Distinguish from financial assets that lack  physical substance (e.g. receivables)
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Initial recognition Identifiable intangibles Purchased:  capitalized Internally developed:  expensed  due to uncertainty  of  future benefits if future benefits are reasonably  assured , costs directly  attributable to development  are  capitalized . Goodwill Purchased:  capitalized Internally developed:  never capitalized Deferred charges Are charges incurred in current period that will benefit  future periods Most  should be  expensed  immediately except for a few  circumstances 
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Measurement subsequent to  initial recognition Intangibles are measured on balance sheet date at Amortized cost adjusted for impairment for assets with  definite life Original cost adjusted for impairment for assets with  indefinite life Amortization Limited-life intangibles:  over useful life Indefinite-life intangibles:  not amortized Intangibles assumed to have  no residual value , unless: 1. There is a commitment to purchase, or 2. There is an observable market
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Measurement subsequent to  initial recognition Impairment - Limited-life intangibles PE GAAP recoverability test  (Net future cash flow vs. BV)  No reversal permitted IFRS:   Reversal permitted if underlying RA has changed
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Measurement subsequent to  initial recognition Impairment of Indefinite-life intangibles Non-goodwill intangibles PE GAAP  one-step fair value test  (FairV vs. BV) Test when events and circumstances indicate possibility of  impairment Reversal not permitted IFRS:   one-step fair value test  (FairV vs. BV) – Test on an annual basis whether or not indication of impairment Reversal permitted Goodwill:  PE GAAP  two-step fair value test (FairV vs. BV) When events or changes in circumstances indicate Reversal not permitted IFRS:    two step recoverable amount test (RA vs BV) – Test annulay or whenever there is an indication Reversal not permitted
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Measurement subsequent to initial  recognition (Cont’d) Factors to consider when determining  economic useful life  of an intangible: 1. Expected future usage
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ADMS3585 Winter 2010 Ch12 slides - CHAPTER 12...

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