Expendituresthat may lead to patents, copyrights, new processes, and new products.All R&D costs are expensed when incurred.Research and Development Costs▼ HELPFUL HINTResearch and development costs are not intangible costs, but becausethese expenditures may lead to patents and copyrights, we discuss them in this section.TYPES OF INTANGIBLES
CopyrightsGive the owner the exclusive right to reproduce and sell an artistic or published work.Granted for the life of the creator plus 70 years.Capitalize costs of acquiring and defending it. Amortized to expense over useful life.TYPES OF INTANGIBLES
Trademarks and Trade NamesWord, phrase, jingle, or symbol that distinguishes or identifies a particular enterprise or product.►Wheaties, Monopoly, Sunkist, Kleenex, Coca-Cola, Big Mac, and Jeep.Legal protection for indefinite number of 20 year renewal periods. Capitalize acquisition costs. No amortization.TYPES OF INTANGIBLES
GoodwillIncludes exceptional management, desirable location, good customer relations, skilled employees, high-quality products, etc. Only recorded when an entire business is purchased.Goodwill is recorded as the excess of ...►purchase price over ►the FMV of the identifiable net assets acquired.Internally created goodwill should not be capitalized.TYPES OF INTANGIBLES
FRANCHISES•A franchiseis the right received (usually purchased) by a business or individual to perform certain functions or sell certain products or services.•The cost of a franchise includes expenditures made to purchase the franchise, legal fees, and other costs incurred in obtaining the franchise.
Discuss how long-lived assets are reported and analyzed.
Return on Assets indicates the amount of net income generated by each dollar of assets.ANALYSIS
An entity separate and distinct from its owners.Classified by PurposeNot-for-ProfitFor ProfitClassified by OwnershipPublicly heldPrivately held►Facebook►IBM►Caterpillar►General Electric►Salvation Army►American Cancer Society►Cargill Inc.Discuss the major characteristics of a corporation.
Separate Legal ExistenceLimited Liability of StockholdersTransferable Ownership RightsAbility to Acquire CapitalContinuous LifeCorporation ManagementGovernment RegulationsAdditional TaxesCharacteristics that distinguish corporations from proprietorships and partnerships.AdvantagesDisadvantagesCHARACTERISTICS OF A CORPORATION
Separate Legal ExistenceLimited Liability of StockholdersTransferable Ownership RightsAbility to Acquire CapitalContinuous LifeCorporation ManagementGovernment RegulationsAdditional TaxesCorporation acts under its own name rather than in the name of its stockholders.