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Development costs are an exception amortize where

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Unformatted text preview: of this entry on: – The income statement? – The balance sheet? Statement Presentation Depreciation of tangible asset is a contra asset account Amortization of intangible asset is offset against the asset account No cash flow impact Amortization expense disclosed separately Valuing at Market Value IFRS - Option for valuing at market value Presentation at gross or proportional Adjustment reported in other comprehensive income Account for similar assets in same way Intangible Assets Knowledge assets or intellectual capital Separately identifiable Only capitalize assets acquired Development costs are an exception Amortize where limited useful life Are capital assets with no physical qualities –can not be seen, touched, or felt Intangible assets include patents, copyrights, trademarks, franchise rights, brand names, customer lists, software, licenses, movies, human resources, and goodwill To be recognized as an intangible asset: Must be separately identifiable (be able to sell or license it) Must have future benefits The future benefits must be controlled by the entity The cost must be reliably measurable Or it represents a contractual or legal right Jessica Gahtan ACTG2011 Page 5 Final Notes Chapters 8- 12 Fall 2013 Intangible asset–buy v. develop Goodwill Intangible asset Only results from acquisition of a business Excess of purchase price over fair market value of net assets acquired Sale of Capital Assets Remove all aspects of asset and amortization from books Gain results if asset sold for more than net book value Loss results if asset sold for less than net book value Impairment of Capital Assets Impairment occurs if recoverable amount less than carrying amount – RA ‹ CA RA is the greater of: – net realizable value (NRV) (fair value less cost to sell) and – value- in- use (VU) Once an impairment has been recorded - must assess annually if there indicators of recovery Record a reversal of impairment if there is a subsequent increase in recoverable amount (exception goodwill) – i.e., an impairment loss on goodwill cannot be reversed Recovery only up to the carrying amount that would be if there had been no impairment – i.e., net of any amortization or depreciation, not a “revaluation” to original cost Jessica Gahtan ACTG2011 Page 6 Final Notes Chapters 8- 12 Fall 2013 Capital Assets & Cash Flow Reported in investing activities section Purchase is a use — sale is...
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