Intangibles Flashcards
*Understand which intangible assets should and should not be amortized
perpetual franchise (trademarks should not be amortized)
*If a patent is defended the cost of the fees should be?
Added to the patent and amortized over the life of the patent
Intangible Asset:
Lacks physical existence
They are not financial instruments
Two types of Intangible Assets:
Purchased - purchased from another party
Internally created - created from within the company
Intangibles can have either unlimited or limited life
-Limited-life can be amortized based upon the pattern in which
the company consumes or uses up the asset
-Unlimited or indefinite do not amortize - the only way to revalue
is through the impairment test
Marketing-related intangibles
Trademark or a trade name: examples - Kleenex, Band-Aid, Coke, Pampers,
google, Kool-Aid, Jello indefinite number of renewal periods of 10 years
trademarks do not amortize.
How do you create trademark values on the accounting books?
cost to create or establish the trademark
cost to renew the trademark
cost to protect the trademark
marketing costs to show the originality of the trademark
court and attorney fees to protect against the improper use of the trademark
cost of buying an existing trademark
Customer-related intangibles
customer list - establish the value based upon an appraisal or if the list is sold
to an outside party this intangible can be amortized - (GAAP) accountant establishes the useful life
NOTE: IFRS allows for the reversal of impairment losses when there has been a change
in economic conditions or in the expected used of the asset. U.S. GAAP does not allow for impairment losses to be reversed.
NOTE: IFRS does allow costs in the development phase of a product to be capitalized once
technological feasibility is achieved
U.S. GAAP - research and development costs are EXPENSED
