LN-Intangibles-Ch12 - Ch 12: Intangibles ACCT 401, SP 11...

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Ch 12: Intangibles ACCT 401, SP 11 Part I: Intangibles – acquisition and disposition 1. Features of Intangibles 1) long-lived, revenue-producing assets. A) Lack physical existence derive value from the rights/privilege granted to use the intangibles B) Future benefits less certain than tangible assets. C) Not financial instruments Different from financial instruments (also assets without physical substance), such 2. Direct Costs of Intangibles vs. Research and Development Costs 1) Direct cost : costs that are related to ____________________________________. E.g. legal costs, filing fees, consulting costs 2) : Costs incurred to _____________________________________________. A) FASB’s logic for this decision is: a. difficult to determine future benefit and cash flow associated with the activities (hard to determine benefit periods) b. difficult to associate costs with a particular achievement : a. If an asset is purchased specifically for a single R&D project, its cost is considered R&D and expensed immediately. b. However, the cost of an asset that has an alternative future use beyond the current R&D project is NOT a current R&D expense. Instead, the depreciation or amortization of these alternative-use assets is included as R&D expense 3. Common types of intangibles :
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Ch 12: Intangibles ACCT 401, SP 11 1) Patents – An exclusive right recognized by law and granted by the US Patent Office for 20 years. 2) Copyright – exclusive ownership right of protection given to a creator of a published work. Life of the creator plus 70 years (Not renewable) The accounting for copyrights is virtually the same as for patents. 3) Trademark or trade name – the exclusive right to display a word, slogan, symbol or emblem that distinctively identifies a company, product or service. The trademark is protected by the US patent office for 10 years, and the protection is renewable indefinitely in 10-year period . 4) Franchises – a contractual arrangement where a franchisor grants the franchisee the right to use the franchisor’s trademark or trade name and may include product and formula rights. Example: fast food outlets and car dealerships. 5) Goodwill – a unique intangible asset in that its cost cannot be associated with any specifically identifiable right and it is not separable from the company itself. A. It represents the value of a company over and above its identifiable tangible and intangible assets. Goodwill can emerge as a result of its reputation, its trained employees and management team, or any other unique features of the company. B. It only arises from acquiring the WHOLE company or a portion of a company. C. Goodwill =
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This note was uploaded on 02/22/2012 for the course ACCT 401 taught by Professor Winchel during the Spring '10 term at South Carolina.

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LN-Intangibles-Ch12 - Ch 12: Intangibles ACCT 401, SP 11...

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