Intangible Assets Flashcards
What is goodwill?
It represents the reputation, business contacts, staff relationships and industry experience that make a business more than a collection of assets. It is a residual number.
What is a coinsurance requirement/clause?
It provides that if the property is insured for less than a certain percentage of the FV at the time of the loss, the insurance company will be liable for only a portion of the loss, the insured in effect becomes a coinsurer with the insurance company
When an insurance policy contains a coinsurance clause, the amount recoverable from the insurance company is limited to the lesser of 3 amounts. What are these amounts?
- face of the policy
- amount of the loss (based on fair market value)
- amount of loss adjusted for coinsurance requirement
When a single insurance policy is involved on a loss, what is the coinsurance limitation formula?
((face of policy)/(coinsurance percentage X FMV of asset)) X loss
If an asset is insured under 2 or more policies, the amount recoverable is still limited but how is the amount recovered from the various insurance companies?
in the ratio of the face amount of the individual policy to the face amount of all policies
What is depletion?
The allocation of cost of natural resource
Define intangible assets
assets other than financial assets that lack physical substance. Their value stems from the rights their ownership confers.
Name 4 different bases for categorizing intangible assets.
- identifiablity - separately identifiable or lacking specific identification
- manner of acquisition - acquired singly, in groups, in business combinations, or developed internally
- expected period of benefit - limited by laws or contract, related to human or economic factors or indefinite or indeterminate duration
- separability from an entire enterprise - rights transferable without title, saleable, or inseparable from the enterprise or a substantial part of it
Name 6 most common types of intangible assets
- patents
- copyrights
- trademarks or trade names
- franchises
- licenses
- goodwill
Intangible assets should be recognized as an asset apart from goodwill if it arises from contractual or other legal rights. Name 8 intangible assets that meet the contractual-legal criterion.
- trademarks or trade names
- internet domain names
- noncompetition agreements
- royalty agreements
- franchise agreements
- patented technology
- computer software
- trade secrets
List 3 assets that are intangible assets but do not arise from contractual or legal rights but nonetheless should be recognized apart from goodwill?
- customer lists
- unpatented technology
- databases
Costs of developing, maintaining or restoring intangible assets should be capitalized or expensed?
expensed. Most cost incurred internally to develop “intangible assets” are research and development costs
How is an intangible asset amortized?
If it has a finite life, it is amortized over its useful life. If it has an indefinite life, it is not amortized but is reviewed annually for impairment
List the 6 specific items that should be considered when determining the useful life of an intangible asset
- expected use of the asset by the entity
- expected useful life of another asset or group of assets to which the useful life of the intangible asset may relate (such as mineral rights to depleting assets)
- an legal, regulatory or contractual provisions that may limit the useful life
- an legal, regulatory or contractual provisions that enable renewal or extension of the asset’s legal or contractual life without substantial cost
- effects of obsolescence, demand, competition, and other economic factors
- level of maintenance expenditures required to obtain the expected future cash flows from the asset
IFRS - after initial recognition in the FS, an intangible asset should be measured under 1 of 2 treatments. What are they?
- benchmark treatment - historical cost less any amortization and impairment losses or
- allowed alternative treatment - revalued amount (based on FV) less any subsequent amortization and impairment loss
