CollaborativeResearchPaper

CollaborativeResearchPaper - Running Head Methods used for...

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Running Head: Methods used for Accessing the Value of Intangible Assets Collaborative Research Paper, Group 2 February 27, 2011 Methods used for Accessing the Value of Intangible Assets Abstract Intangible assets have been, and continue to be an important part of business. Accurately determining their values, and knowing how to properly account for their values is a very Page 1 of 14
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Running Head: Methods used for Accessing the Value of Intangible Assets Collaborative Research Paper, Group 2 February 27, 2011 important step in determining a company’s worth as a whole. The methods used for accessing their value vary depending on the type of intangible assets. Some intangible assets have indefinite lives, thus they are not accrued. The value of other intangible assets is accrued depending on their useful lives among other things. Introduction Intangible assets are an integral part of most companies. Unlike other assets such as property, plant or equipment, intangible assets do not have physical substance. However, they Page 2 of 14
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Running Head: Methods used for Accessing the Value of Intangible Assets Collaborative Research Paper, Group 2 February 27, 2011 can be just as valuable as or even more so than physical assets in many cases. Intangible assets include: patents, copyrights, trademarks, franchises, and goodwill. Like physical assets they can also be bought or sold. Accounting for intangible assets is also similar to the accounting for physical assets; their initial valuation is their original cost, which includes the cost of purchasing or developing the asset. The major exception is accounting for the certainty of the future value of the intangibles (Spiceland, Sepe, and Nelson, 2011). The methods used to access their present and future values vary depending on many things, such as, the success of the company and its product or service, or the type of intangible asset. Patents As indicated by Spiceland, Sepe & Nelson (2011), a patent is defined as an “exclusive 20-year right to manufacture a product or use a process” (Spiceland et al., 2011, p. 503). According to Wikipedia, “patents in the modern sense originated in 1474, when the Republic of Venice enacted a decree that new and inventive devices, once put into practice, had to be communicated to the Republic to obtain the right to prevent others from using them”. Patents have since gained widespread usage and are a big part of the operation of today’s businesses, making their proper valuation important ("Patent," n.d.). The nature of a patent makes its valuation very difficult. As indicated by Wanetick (2010), there are large number of factors that go into valuing a patent (Wanetick, 2010, p. 64- 65). In many cases, a combination of intangible asset valuation approaches are used in valuing Page 3 of 14
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Running Head: Methods used for Accessing the Value of Intangible Assets Collaborative Research Paper, Group 2 February 27, 2011 the patent. A cost approach, which reflects the costs expended during development of the
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This note was uploaded on 07/19/2011 for the course ACCT 302 taught by Professor S during the Spring '11 term at Lee.

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CollaborativeResearchPaper - Running Head Methods used for...

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