Intangibles Flashcards
How do you account for the purchased intangible?
Capitalize at Cost
How do you account for internally developed intangibles?
Expense when incurred. GAAP prohibit capitalizing internally developed intangibles.
How do you account for internally developed Trademarks?
Expense except for the following:
- Legal fees and other costs related to the successful defense of assets.
- Registration or consulting fee
- Design Cost
- Other direct costs to secure the asset.
How do you account for Goodwill from advertising>
Expense when incurred
How do you account for developing, maintaining, or restoring goodwill?
Expense when incurred
How do you measure the cost of intangible asset acquired from other enterprise?
1- The amount of cash disbursed or Fair value of other assets distributed
2- Present value of amounts to be paid for liabilities incurred
3- Fair value of the consideration received for stock issued
4- Fair value of the consideration given or by the Fair value of property acquired, whichever more evident
What is an most important condition to determine if the intagible asset should be amortized?
It MUST have a finite life.
How do you account for initial Franchise fees and continuing Franchise fees?
Capitalize the “Initial Franchise Fees” and “Continuing Franchise Fees” would be expense as incurred
How do you account for Start-Up costs?
Start up costs should be expensed as incurred
What is tax treatment o Start-Up Costs?
Tax rule says that 5,000 is deducted and Balance is amortized over 15 years.
What kind of cost is Legal fee for preparing a charter?
Start-Up Costs
What kind of cost is legal fee for preparing partnership agreement?
Start-Up Costs
What kind of cost is fee for preparing bylaws?
Start-Up Costs
What kind of cost is fee for preparing original stock certifications?
Start-Up Costs
What kind of cost are filing fees?
Start-Up Costs
What kind of cost is associated with opening a new facility?
Start-Up Costs
What kind of cost is associated with introducing anew product and services?
Start-Up Costs
What kind of cost is associated with Conducting business in new territory?
Start-Up Costs
What kind of cost is associated with conducting business with new class of customer?
Start-Up Costs
What kind of cost is associated with initiating a new process in existing facility?
Start-Up Costs
What kind of costs are associated with Routine, ongoing efforts to refine, enrich or improve the quality of existing product, services, process or facilities?
NOT a Start-Up Cost
How do you account for Business mergers or acquisitions?
NOT a Start-Up Cost
How do you account for Ongoing customer acquisitions?
NOT a Start-Up Cost
How do you account for R&D Expense?
Expense as incurred
In R&D project, how do you account for Materials that have alternative future uses?
Capitalize over their useful lives not the life of R&D project. PPE
In R&D project, how do you account for Equipment that have alternative future uses?
Capitalize over their useful lives not the life of R&D project. PPE
In R&D project, how do you account for Facilities that have alternative future uses?
Capitalize over their useful lives not the life of R&D project. PPE
In R&D project, how do you account for R&D costs of ANY NATURE undertaken on behalf of others under contractual agreement?
Treat like INVENTORY, Expense the cost incurred as cost of SALE
Why R&D costs of a project undertaken on behalf of other is not expensed as incurred?
Due to high degree of uncertainty of any future benefits.
Do you disclose R&D expenses in FS or notes to FS
Disclosure is required in FS and notes to FS of the amount of R&D expenses for the period.
Is Marketing Research a R&D Expense?
No. It is not a R&D Expense.
Is Quality control testing a R&D Expense?
No. It is not a R&D Expense.
Is Reformulation of a chemical compound a R&D Expense?
No. It is not a R&D Expense.
Are “Routine Periodic Changes” to old products a R&D Expense?
No. These are manufacturing costs.
Are costs associated to “Troubleshooting in production stage” a R&D expenses?
No. These are manufacturing costs.
How do you Account for R&D Expense for Computer Software?
- From Idea to Technological Feasibility - Expense
- From Technological Feasibility to Release Product for Sale - Capitalize and amortization begins.
- Duplicate packaging - Inventory costs of goods sold
How do you account for costs incurred to actually produce the product (software)?
These costs are charged to Inventory
How do you report the Capitalized software costs?
They are reported at Lower of cost or market, where market is equal to NRV.
How you do account for software development costs incurred after the preliminary project state and for upgrades and enhancement?
These are costs after the Technological feasibility is established, so they are capitalized. These include:
1- Direct costs of materials and services
2- Cost of employees DIRECTLY associated with the project.
3- Interest costs incurred for the project
How do you account for a software previously developed for internal use is subsequently sold to outsider?
Use cost recovery system, then revenue. Proceed received should be applied first to the carrying amount of the software, then recognize as revenue (after the carrying amount of the software has reached zero.
How to determine impairement
