12IntangibleAssets

12IntangibleAssets - Intermediate Financial Accounting I...

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Intermediate Financial Accounting I Intangible Assets
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Intangible Assets 2 Chapter Outline Definition and common types of intangible assets Valuation and costs of intangibles Accounting for finite-life intangibles and intangibles with indefinite lives. Accounting for patents, copyrights, franchise and licenses, trade names and trademarks, and start-up costs. Accounting for R&D and computer software costs. Accounting for goodwill
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Intangible Assets 3 Definition Of Intangible Assets Assets -- a. with future economic benefits, b. no physical substance, c. with high degree of uncertainty concerning the future benefit.
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Intangible Assets 4 Common Types of Intangibles Patents, copyrights, franchises, start-up costs, trade names, trademarks, goodwill etc. .
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Intangible Assets 5 Valuation of Intangibles Intangibles are recorded at cost and are also reported at cost at the end of an accounting period. Intangibles with limited life are subject to amortization and possible impairment test. Intangibles with indefinite life are only subject to impairment test at least annually.
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Intangible Assets 6 Costs of Intangibles Costs of Intangibles include acquisition costs plus any other expenditures necessary to make the intangibles ready for the intended uses (i.e., purchase price, legal fees, filing fees etc.; not including internal R&D). Essentially, the accounting treatment of valuation for intangibles closely parallels that followed by tangible assets.
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Intangible Assets 7 Examples 1. Issuance of stock to acquire intangibles. 2. Lump-sum purchase of intangibles. Costs will be allocated in accordance with the fair market value of each individual intangible.
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Intangible Assets 8 Intangibles Assets with Finite lives Patents (20 years), copyrights (the life of the creator plus 70 years), franchise and license (the contractual life). The costs are subjected to amortization (a process of cost allocation) over the shorter of the legal or useful life, not to exceed 40 years.
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Intangible Assets 9 Amortization of Intangibles The impairment test needed only when events indicate that the book value may not be recoverable. Amortization Method: Straight-line method. Other method can be applied if it is more appropriate than the S-L method. Residual value: Usually zero.
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Intangible Assets 10 Amortization of Intangibles (contd.) Journal Entry: Amortization Expense xxx Intangible Asset xxx (or Accumulated Amortization)
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Intangible Assets 11 Intangibles Assets with Indefinite Lives Trade names, trademarks, goodwill, in- The costs are not subject to amortization. Impairment test is required at least annually.
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12 1. Patents Granted by the U.S. Patent and Trademark Office for a period of 20 years. A patent gives the holder the exclusive
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This note was uploaded on 04/08/2011 for the course ACCT 2303 taught by Professor Crawford during the Spring '11 term at Tarrant County.

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12IntangibleAssets - Intermediate Financial Accounting I...

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