Its ability to use or sell the intangible asset 4 How the intangible asset will

Its ability to use or sell the intangible asset 4 how

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Its ability to use or sell the intangible asset 4. How the intangible asset will generate probable future economic benefits (e.g., can the entity demonstrate the existence of a market for the asset?) 5. The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset 6. Its ability to measure reliably the expenditure attributable to the intangible asset during its development
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Costs similar to R&D costs 1. Start-up costs for a new operation 2. Initial operating losses 3. Advertising costs 4. Computer software costs These costs are expensed as incurred, similar to the accounting for R&D costs.
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Start-up costs What are start-up costs? One time costs that are incurred to start a new operation E.g., opening a new plant, introducing a new product or service, or conducting business in a new territory Organizational costs, which include legal and state fees incurred to organize a new business entity, are start-up costs Start-up costs do not include costs the cost of building or other tangible assets How do you account for start-up costs? Expensed as incurred
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Initial operating losses, advertising costs, and computer software costs Many times a company records operating losses in the early years of the company’s operations These are expensed immediately and cannot be capitalized Advertising costs are either expensed as incurred or the first time that the advertising takes place Advertising costs are not amortized over a period of time E.g., advertising on a billboard is not expensed over the life of the billboard Computer software costs are expensed as incurred and are typically included as selling and administrative expenses.
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R&D costs – Example Compute the amount to be reported as research and development expense. $66,000 59,000 100,000 128,000 50,000 0 R&D Expense $403,000 $330,000 / 5 = $66,000 Cost of equipment acquired that will have alternative uses in future R&D projects over the next 5 years (uses straight-line depreciation) Materials consumed in R&D projects Consulting fees paid to outsiders for R&D projects Personnel costs involved in R&D projects Indirect costs reasonably allocable to R&D projects Materials purchased for future R&D projects $330,000 59,000 100,000 128,000 50,000 34,000
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Next Time Review the slides from today’s class Next Class: Revenue recognition (chapter 18) Any Questions?
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  • Winter '18
  • jane smith

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