ACT3391Fall2009handoutCH12

ACT3391Fall2009handoutCH12 - Notes related to Chapter 12...

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Unformatted text preview: Notes related to Chapter 12 Intangible assets lack physical form and derive their value from the rights and privileges granted to the company using them. The accounting treatment for purchased intangibles resembles that of purchased tangibles, i.e., PP&E. Costs incurred internally to create intangibles are generally expensed as incurred. Generally speaking, research and development costs are expensed as incurred. (Note that iGAAP requires the capitalization of certain development expenditures.) Report or disclose R&D expenses. Amortization is the word used to describe the cost allocation process for, i.e., the expensing of, intangibles. NOT ALL intangibles are amortized. Limited-life intangibles, e.g., patents, are amortized while indefinite-life intangibles, e.g., trade names, are NOT amortized. ALL intangible assets should be reviewed (at least annually) for impairment. Illustration 12-1 summarizes the accounting treatment for intangibles Goodwill ends up on a companys balance sheet when that company buys another company and pays an amount that is greater than the acquired companys net identifiable assets. Note that there is no such thing as negative goodwill. Instead, if the amount paid is less than the acquired companys net identifiable assets, the purchaser records a gain. On the balance sheet, goodwill should be reported separately from other intangible assets....
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ACT3391Fall2009handoutCH12 - Notes related to Chapter 12...

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