SB-BMGT310-sess27_28_ch12

SB-BMGT310-sess27_28_ch12 - Intangible Assets Chapter 12...

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Chapter 12-1 Intangible Assets Chapter 12 Initially prepared by Coby Harmon, University of California, Santa Barbara
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Chapter 12-2 Intangible Assets Marketing- related Customer- related Artistic- related Contract- related Technology- related Goodwill Intangible Asset Issues Types of Intangibles Impairment of Intangibles Research and Development Costs Presentation of Intangibles and Related Items Characteristic s Valuation Amortization Limited-life intangibles Indefinite-life intangibles other than goodwill Goodwill Identifying Accounting Other similar costs Conceptual questions Intangible assets R&D costs
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Chapter 12-3 Intangible Asset Issues LO 1 Describe the characteristics of intangible assets. Characteristics (1) Assets – provide future economic benefit (2) Lack physical existence. (3) Exclude financial instruments. Normally classified as long-term asset. Common types of intangibles: Patents Copyrights Franchises or licenses Trademarks or trade names Goodwill
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Chapter 12-4 Intangible Asset Issues LO 1 Describe the characteristics of intangible assets. Economic Characteristics (1) Often non-exclusive (2) Scalable – more use increases value (3) Strong network effects (4) Difficult to manage and control (e.g. employees) (5) Easy to copy (6) Large fixed costs, low marginal cost (7) Valuation is difficult (8) Often not evidenced by financial transaction
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Chapter 12-5 Intangible Asset Issues LO 2 Identify the costs to include in the initial valuation of intangible assets. Purchased Intangibles : Recorded at cost. Includes all costs necessary to make the intangible asset ready for its intended use. Valuation Internally Created Intangibles: Generally expensed. Only capitalize direct costs incurred in developing and/or protecting the intangible, such as legal costs.
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Chapter 12-6 Intangible Asset Issues LO 3 Explain the procedure for amortizing intangible assets. Amortization of Intangibles Limited-Life Intangibles: Amortize to expense. Credit asset account or accumulated amortization. Indefinite-Life Intangibles: No foreseeable limit on time the asset is expected to provide cash flows. No amortization.
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Chapter 12-7 Types of Intangibles LO 4 Describe the types of intangible assets. Six Major Categories: (1) Marketing-related – indefinite life (trademarks [10+10+ ….], brand names) (2) Customer-related – finite life (customer lists, order backlog) (3) Artistic-related – finite life (copyrights – author’s life + 70 years)
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12-8 Types of Intangibles LO 4 Describe the types of intangible assets. Six Major Categories: (4) Contract-related – (inde)finite lives (franchises, licenses, permits) (5) Technology-related – finite life (patents [20], development costs) (6) Goodwill – indefinite life (balancing figure i.e. Price paid less FV of separable net assets)
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SB-BMGT310-sess27_28_ch12 - Intangible Assets Chapter 12...

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