F3 M7, M8, F4 M1 Flashcards
What are classifications of intangibles (types)
Patents, copyrights, granchises, trademarks, and goodwll
T or F Intangible assets may be either specifically identifiable or not specifically identifiable
T Specially identifiable = patents, copyrights, franchise; not specially identifiable (goodwill)
Under U.S> GAAP the cost of intangible assets NOT AQUIRED FROMOTHERS should be expense when occurred and examples are
Trademarks, goodwill from advertising, cost of developing, maintaining or restoring good will; unsuccessful defense, test for impairment
Intangible capitalized cost include what?
Legal fees related to successful defense, registration or consulting fees, design cost, other direct cost to secure an asset
T or F; If an intagible asset has an economic life is should be amortized
T
T or F; If an intangible asset economic life is indeterminable it should be tested for impairment
T
Good will and assets that have indefinite lives should be amortized T or F
F; they receive impairment test only
T or F Amortized intangible assets have a finite life
T; a patent is amortized over the shorter of its estimated life or remaining legal life
Continuing Franchise Fees are amortized T or F
F they are expensed; only the initial franchise fees the intangible asset is amortized
T or F When notes payable is involved with an asset you need to discount the note payable down to the present value
T; when you see a problem where an asset involves a note payable (like an intangible asset, or a piece of equipment traded for a note payable) the payable amount needs to be discounted to the present value and that can be used to determine whether or not the asset has a gain or loss IF THE ASSET IS SOLD
Start up costs are expensed an include the following examples
Start up costs are expenses when incurred: organizing a new entity (legal fees etc.), opening a new facility, introducing a new product or service, initiating a new process in an existing facility. TAX RULE: first $5000 spent is tax deductible and can be amortized over 15 years.
Start up costs do not include cost associated with
business mergers or acquisitions, ongoing customer acquesistion, routine effors to refine or improve the quality ofexisting producst and services
Start up costs do not include cost associated with
business mergers or acquisitions, ongoing customer acquisition, routine efforts to refine or improve the quality of existing products and services
Accounting for Research and Development Costs are Expensed T or F
T; except materials, equipment, or facilities that have ALTERNATIVE FUTURE USES, capitalize and depreciate assets over their useful lives; Inventory contractual arrangment
What items are not considered research and development
Quality control testing, marketing research, reformulation of a chemical compound, routine periodic design changes to old projects
Software that are to be sold, leased, or licensed development costs are capitalized when?
After technological feasibility is established
Software to be used internally has similar rules to software sold externally in that cost are capitalized when?
After technological feasibility is established; capitalized using straight line method
Legal fees to obtain a patent are R&D and are capitalized T or F
F; legal fees for a patent (intangible asset) are start up costs and expensed
Impairment of Intangible assets other than goodwill are tested for impairment how often?
annually
When testing property, plant and equipment or intangible asset with a finite life what are your methods
Determine the impairment using undiscounted future cash flows, determine the amount of impairment using fair value/discounted cash flows
Intangible asset with a FINITES life is tested for impairment using what two step impairment test?
(1) Recoverability test (carrying amount compared with sum of undiscounted NET cash flows) if your cash flows exceed the carry amount then you will recover (2)If failed, meaning, if you are not going to recover and the carrying amount exceed the undiscounted future cash flows then you go to step two would use FAIR VALUE or discounted cash flows
How is the impairment life for an intangible asset tested with an INDEFINITE life? ONE STEP IMPAIRMENT TEST
An indefinite life (such as goodwill) is tested by comparing fair value to carrying amount or discounted cash flows
Impairment loss formula
Future cash flows - Net Carrying Value; if answer is greater than 0 then no impairment loss
Held to maturity is accounted for using Fair value T or F
F; if you see held to maturit that means it should be accounted for using cost (amortized cost)
Debt securities are reported for at cost T or F
F; debt securities (Available for Sale, Trading for Sale)
