Intangible Assets Flashcards
Which of the following costs must be expensed when incurred?
1) The cost of purchasing a trademark.
2) The fee paid to obtain a franchise.
3) The cost of goodwill acquired in an acquisition method business combination.
4) Research costs incurred in developing a patented product.
Choice “4” is correct.
Research costs related to internally developed intangible assets must be expensed in the period incurred.
Legal fees incurred to register internally developed patents are also capitalizable.
Choice “1” is incorrect. The cost of purchasing a trademark is capitalized as an intangible asset.
Choice “2” is incorrect. The fee paid to obtain a franchise (the initial franchise fee) is capitalized as an intangible asset. The continuing franchise fee is expensed when incurred.
Choice “3” is incorrect. Goodwill acquired in an acquisition method business combination is capitalized as an intangible asset. However, costs to develop, maintain, or restore goodwill are expensed.
