FAR: ALL: TBS: 4/14/2018

Question 1

Examples of Intangible Assets which can be classified as Definite or Indefinite Life

Answer 1

1) Trademark
2) Franchise (initial fees)

Characteristics:

1) Amounts Capitalized: Only expenditures made to external parties
2) Depends on whether its definite or indefinite
3) Recognizing Impairment losses (impairment testing): Depends on whether it’s definite or indefinite

Question 2

Examples of Intangible Assets which are classified as Definite Life

Answer 2

1) Customer List
2) Copyright
3) Patent

Characteristics:

1) Amounts Capitalized: Only expenditures made to external parties
2) Amortization: Amortize
3) Recognizing Impairment Losses (impairment testing): Recoverable cost test

Question 3

Example of Intangible Asset in which it’s part definite life, part not intangible

Answer 3

1) Software Development

Characteristics:

1) Capitalization: Only expenditures beyond technoligical feasbility
2) Amortization: Amortize expenditures beyond technological feasibility
3) Impairment testing: Net realizable value test for capitalized amount

Question 4

Indefinite Life Intangible

Answer 4

1) Goodwill

Characteristics:

1) Capitalization: Only expenditures made to external parties
2) Amortization: Do not amortize
3) Impairment: Fair value test