A franchiseis the right received (usually purchased) by a business or individual to perform certain functions or sell certain products or services.oThe cost of a franchise includes expenditures made to purchase the franchise, legal fees, and other costs incurred in obtaining the franchise.GoodwillGoodwill is a residual amount, the amount of the purchase price of a business that is leftover after all other tangible and intangible assets have been identified.oGoodwill represents the miscellaneous intangible resources, factors, and conditions (e.g., reputation, functioning systems, and industry experience) that makes the company more than just a collection of assets.oIn a basket purchase, each identifiable asset is recorded at an amount equal to itsestimated fair market value; any residual is reported as goodwill.Amortization is much easier than depreciation because intangible assets are to be amortized always by the straight-line method unless there is strong justification for using another method.Some intangibles are deemed to have a perpetual life and therefore are not amortized (e.g., goodwill and most trademarks). Depletion of Natural ResourcesNatural resourcesare consumed (depleted) as the physical units representing these resources are removed and sold.Example:oLand containing copper mineral deposits is purchased at a cost of $5,500,000. After all the copper is removed, the land is expected to have a residual value of $250,000. oIt is estimated that the land holds 1,000,000 tons of copper. The company extracts 80,000 tons of copper in year 1.Depletion charge per ton = 5,500,000 – 250,000/1,000,000 tonsDepletion charge per Ton = $5.25Depletion per One Year = $5.25 x 80,000 tons = $420,000 depletion expenseChanges in Useful LifeDivide the book value by the new estimated remaining lifeChanges in Depletion(Estimated units of production)A change in accounting for natural resources occurs when the estimate of the recoverable units changes as a result of further discoveries or improved extraction processes.