Intangible Assets Flashcards
Identifiable non-monetary asset without physical substance
Intangible asset
Three (3) essential criteria for intangible asset
Identifiability
Control
Future economic benefits
When can an intangible asset be recognized?
- Probable that future economic benefits attributable to the asset will flow to the entity; and
- Cost of the intangible asset can be measured reliably
Initial measurement of intangible asset
@ Cost
Research costs (or costs incurred in research phase) are recognized as:
Expense
Intangible assets arising from development shall be recognized if and only if an entity can demonstrate:
- Tech. feasibility of completing the asset
- Intention to complete and use/sell intangible asset
- Ability to use or sell the intangible asset
- How intangible asset will generate probable future economic benefits
- Availability of adequate, technical, financial and other resources to complete development and to sell/use the asset
- Ability to measure reliably expenditure attributable to intangible asset
If entity cannot distinguish research phase from development phase, the treatment is
Research phase (expensed)
When do R&D expenses typically occur?
Beginning of commercial production and distribution
Subsequent measurement of intangible asset
Cost or revaluation model
When can revaluation model be used for subsequent measurement of intangible assets?
If there is an active market for the intangible asset
Residual value of an intangible asset is presumed to be
Zero (0)
When can the residual value of an intangible asset not be zero?
- There is a commitment by a 3rd party to purchase the asset at end of its useful life; or
- There is an active market for the asset and:
* Residual value can be determined by reference to that market; and
* It is probable that such market will exist at end of the asset’s useful life
Expenditures on an intangible asset shall be recognized as
Expense
Government-granted license conferring the sole right to an inventor to exclude others from making, using or selling an invention
Patent
Cost of internally developed patent
- Licensing
- Other related legal fees in securing patent rights
Amortization of patent acquired by purchase
Shorter of:
- Remaining legal life; or
- Useful life
Amortization of patent that is developed internally
Shorter of:
- Legal life; or
- Useful life
Amortization of competitive patent to protect original patent
Competitive patent: Remaining life of old patent
Amortization of an acquired related patent to extend life of old patent
Related patent + unamortized cost of old patent = extended life
Amortization of an acquired related patent which does not extend life of patent/s
Old patent: remaining useful life
New patent: own useful life
Legal life of a patent
20 years
Treatment for cost of litigation
Expensed (whether successful or not)
If litigation is unsuccessful, the treatment of old patent is
Written off as loss
Distinctive design, symbol, or name that uniquely identifies a product
Trademark
Legal life of trademark that has a definite useful life
10 years, renewable for periods of 10 years each
Amortization of a trademark that has a definite life
Shorter of:
- Useful life; or
- Legal life
Impairment of a trademark with definite life
Tested when there is an indication of impairment at end of reporting period
Impairment of a trademark with indefinite life
- At least annually; and
- Whenever there is an indication of impairment
Treatment of cost of litigation for trademark
Expensed
If litigation is unsuccessful, what is the treatment of trademark?
Written off as loss
Government-granted license or right to an author, composer, or artist enabling them to publish, sell, or otherwise benefit from literary, musical or artistic work
Copyright
Cost of copyright
Expenditures in production of work (incl. those required to establish or obtain the right)
Legal life of a copyright
Life of author and for 50 years after death
Right granted by party to another party to sell its products using the former’s name
Franchise
Treatment of continuing franchise fee or periodic payment
Outright expense
Amortization of franchise
Period stated in agreement
Database containing the names, contact information, order history, other relevant information for a list of customers
Customer list
Costs incurred in generating the customer list shall be:
Expensed
