ACCT3111-intangible

ACCT3111-intangible - Chapter 12: Intangibles Objectives 1....

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Chapter 12: Intangibles Objectives 1. Basic of intangible assets. 2. Record the amortization of intangibles. 3. Identify research and development costs. 4. Account for identifiable intangible assets including patents, copyrights, trademarks and tradenames, franchises, and computer software costs. 5. Account for unidentifiable intangibles including internally developed and purchased goodwill. 6. Understand the disclosure of intangibles. (1) Basics of Intangibles (1.1) Characteristics that Distinguish Intangibles Intangible assets are those noncurrent economic resources that are used in the operations of the business but have no physical existence. 1. There is generally a higher degree of uncertainty regarding the future benefits that may be derived. 2. Their value is subject to wider fluctuations because it may depend to a considerable extent on competitive conditions. 3. They may have value only to a particular company. 4. Goodwill and intangible assets with indefinite lives are not expensed. (1.2) Classification of Intangibles 1
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(1.3) Accounting for the cost of intangibles is discussed in FASB Statement No. 142 as follows: 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. Purchased Unidentifiable Intangibles. A company capitalizes the cost of a purchased unidentifiable intangible asset. The principal example of an unidentifiable intangible is goodwill. Internally Developed Identifiable Intangibles. When a company internally develops an intangible assets, such as a patent, it can capitalize only certain costs. The costs of a patent the legal and related costs, but NOT the costs of developing the product or process being patented. Internally Developed Unidentifiable Intangibles. A company expenses the costs of internally developed unidentifiable intangibles as incurred even though they may be expected to have benefits extending beyond the current period. Effects on Income Intangible assets that are typically amortized 1. Patents 2. Copyrights 3. Franchises 4. Computer software costs 5. Leasehold improvements Intangible assets that are typically reviewed for impairment 1. Trademarks and tradenames 2. Licenses that may be renewed indefinitely 3. Goodwill 2
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(2) Amortization and Impairment of of Intangibles Amortization Factors to consider when estimating the useful life of an intangible asset: 1. Legal, regulatory, or contractual provisions that place a limit on the maximum economic life. 2.
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This note was uploaded on 09/29/2011 for the course ACCT 3111 taught by Professor Zhang during the Spring '11 term at CUHK.

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ACCT3111-intangible - Chapter 12: Intangibles Objectives 1....

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