If capitalized development costs must be amortized

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Unformatted text preview: ssumed to have a finite useful life. Thus, it is usual practice to amortize intangible assets over their estimated useful life to the net amount expected to be recovered on disposal, if any. Purchased goodwill should be: (1) Allocated on the basis of the fair values of the underlying assets acquired; then (2) Fully written off against reserves at the time of acquisition; or (3) Recognized as an intangible fixed asset at acquisition and amortized by systematic charges to income over the period during which benefits are expected to arise, which as a general rule do not exceed 5 years. If capitalized, development costs must be amortized over a maximum of 5 years. The Act states that goodwill and other intangible assets shall be depreciated according to plan over at least in 5 years, or a longer period (maximum 20 years) if in accordance with good accounting practice. Organizational costs shall be depreciated over at least 5 years. Intangibles that represent permanent rights are exceptions. The common policy followed by companies has been to depreciate intangibles over 10 years, due to the fact...
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