Ch12s - Chapter 12 Intangible Assets Chapter 12: Key...

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Chapter 12 Intangible Assets
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Chapter 12: Key Concepts ± Define Intangible Assets. ± Valuation and Amortization Issues. ± Specific Accounting Rules for Various Types of Intangible Assets. ± Accounting for Impairments of Intangible Assets. ± Accounting Disclosures related to Intangible Assets. 2 Accounting 301A-Eiler
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What are Intangible Assets? ± Per ASC 350-10-20 defines Intangible Assets as: “Assets (not including financial assets) that lack physical substance.” ± Financial assets also lack physical substance (e.g., bank deposits, A/R, long-term investments in stocks & bonds). Cash or claims to cash give these assets value. Legal rights are what give Intangible assets their value. ± Intangible Assets that Lack Physical Substance ± Rights that produce benefits. ± Examples? ___Legal rights______________. Accounting 301A-Eiler 3
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Valuation Issues ± Two general classification of intangibles for valuation purposes: 1. Purchased Intangibles ± ± Cost: Determined by the more clearly evident of either (1) the fair value of consideration given or (2) the fair value of intangible received. ± Basket purchases – allocate cost relative to fair values. ± Amortize cost over useful life if determinable. 2. Internally Generated (Created) Intangibles ± ± Expense as costs are incurred. (Revisit reasoning shortly…) Accounting 301A-Eiler 4
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Amortization Issues ± Amortization allocates cost over useful life of intangible asset. ± How do we allocate cost over useful life of tangible assets? ± Can only amortize intangible assets with limited lives. ± Amount amortized = cost – residual value. ± Examples of limited-life intangible assets: Accounting 301A-Eiler 5 Marketing Related Customer related Artistic Related Contract related Goodwill Technology related
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Amortization Issues ± Factors companies use to determine useful lives of intangible assets: ± Time period the company will use the asset. ± Useful life of asset or group of assets the intangible asset relates to. ± Legal, regulatory, or contractual provisions that limit the useful life. ± Legal, regulatory, or contractual provisions that permit the useful life to be extended. ± Economic factors. ± Maintenance expenditures needed. Accounting 301A-Eiler 6
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Valuation Issues (cont.) ± Why are Internally Generated (Created) Intangibles expensed as incurred? ± Expenses can be substantial, but future benefits can be
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Ch12s - Chapter 12 Intangible Assets Chapter 12: Key...

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