C11 - 1 Chapter 11 Intangibles An electronic presentation...

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1 Intangibles Intangibles C hapter 11 An electronic presentation by Douglas Cloud Pepperdine University
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2 1. Explain the accounting alternatives for intangibles. 2. Understand the amortization or impairment of intangibles. 3. Identify research and development costs. 4. Explain the conceptual issues for research and development costs. 5. Account for identifiable intangible assets including patents, copyrights, franchises, computer software costs, and trademarks and tradenames. Objectives Objectives Continued Continued
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3 6. Account for unidentifiable intangibles including internally developed and purchased goodwill. 7. Understand the disclosure of intangibles. 8. Explain the conceptual issues regarding intangibles. 9. Estimate the value of goodwill. (Appendix) Objectives
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4 Characteristics that Characteristics that Distinguish Intangibles Distinguish Intangibles There is generally a higher degree of uncertainty regarding the future benefits that may be derived. Their value is subject to wider fluctuations because it may depend to a considerable extent on competitive conditions. They may have value only to a particular company. Goodwill and intangible assets with indefinite lives are not expensed.
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5 Classification of Intangibles Classification of Intangibles Purchased Identifiable Capitalize the cost incurred to acquire an intangible assets with a finite life and amortize over its useful life. Unidentifiable (i.e., goodwill) Capitalize the cost incurred to acquire goodwill and review it for impairment at least annually.
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6 Classification of Intangibles Classification of Intangibles Internally Developed Identifiable Unidentifiable Expense research and development costs as incurred Capitalize certain costs incurred for an intangible asset with a finite life and amortize over its useful life Capitalize certain costs incurred for an intangible asset with an infinite life and amortize over its useful life Expense costs as incurred
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7 1 . Purchased Identifiable Intangibles. A company may purchase an intangible asset from another company. The purchase is handled in the same manner as the acquisition of a single asset, in a group of assets, or in an exchange of similar or dissimilar assets. Accounting for the cost of intangibles is discussed in FASB Statement No. 142 as follows: Continued Continued Accounting of Intangibles Accounting of Intangibles
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8 2. Purchased Unidentifiable Intangibles. A company capitalizes the cost of a purchased unidentifiable intangible asset. The principal example of an unidentifiable intangible is goodwill. Accounting for the cost of intangibles is discussed in FASB Statement No. 142 as follows: Continued Continued Accounting of Intangibles Accounting of Intangibles
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9 3. Internally Developed Identifiable Intangibles. When a company internally develops an
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C11 - 1 Chapter 11 Intangibles An electronic presentation...

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