Intangible Assets

Intangible Assets - Patents provide exclusive rights to...

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Intangible Assets Intangible assets include patents, copyrights, trademarks, trade names, franchise licenses,  government licenses, goodwill, and other items that lack physical substance but provide long-term  benefits to the company. Companies account for intangible assets much as they account for  depreciable assets and natural resources. The cost of intangible assets is systematically allocated to  expense during the asset's useful life or legal life, whichever is shorter, and this life is never allowed  to exceed forty years. The process of allocating the cost of intangible assets to expense is called  amortization, and companies almost always use the straight-line method to amortize intangible  assets. Patents.
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Unformatted text preview: Patents provide exclusive rights to produce or sell new inventions. When a patent is purchased from another company, the cost of the patent is the purchase price. If a company invents a new product and receives a patent for it, the cost includes only registration, documentation, and legal fees associated with acquiring the patent and defending it against unlawful use by other companies. Research and development costs , which are spent to improve existing products or create new ones, are never included in the cost of a patent; such costs are recorded as operating expenses when they are incurred because of the uncertainty surrounding the benefits they will provide....
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