F3 M6 Flashcards
Intangible assets
when a patent has been successfully defended?
the cost to successfully defend it is capitalized to the patent account
when a patent has been unsuccessfully defended?
cost is expensed immediately on the income statement
are franchise fees related to operating revenues included in the cost of the franchise?
No, it’s an operating expense for the franchisee (the one who purchased the franchise from the franchisor)
are R&D costs capitalized?
No, they are expensed immediately
is goodwill subject to the recoverability test?
No, because it has an indefinite life
items capitalized with intangible assets
1) legal and registration fees
2) registration or consulting fees
3) design costs
4) other direct costs to secure the asset
items that cannot be capitalized
1) internally developed trademarks
2) goodwill from advertising
3) the cost of developing, maintaining, or restoring goodwill
how are acquired intangible assets recorded?
at price paid for the asset or by fair value of property acquired
how are intangible assets amortized?
over the lesser of the useful economic life or legal life
why is amortization expense recorded on an intangible asset?
to record the loss in value of the asset each year
if an asset is to be sold for a certain amt at a later date then…
subtract the amt from the cost to acquire the intangible asset, as that will essentially be the residual value of the asset and not be amortized
if a company expects to renew an intangible asset indefinitely
no amortization will be recorded on the books
the impairment test calc
1) sum of undiscounted future cash flows - carrying value
2) if carrying value less than sum of undiscounted future cash flows: no impairment
how are organization costs recorded?
expensed immediately
organizational costs expensed
1) organizing new entity
2) opening new facility
3) introducing new product or service
4) conducting business in new territory or class of customer
5) initiating new process in an existing facility
