Intangibles

Question 1

How do you account for the purchased intangible?

Answer 1

Capitalize at Cost

Question 2

How do you account for internally developed intangibles?

Answer 2

Expense when incurred. GAAP prohibit capitalizing internally developed intangibles.

Question 3

How do you account for internally developed Trademarks?

Answer 3

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.

Question 4

How do you account for Goodwill from advertising>

Answer 4

Expense when incurred

Question 5

How do you account for developing, maintaining, or restoring goodwill?

Answer 5

Expense when incurred

Question 6

How do you measure the cost of intangible asset acquired from other enterprise?

Answer 6

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

Question 7

What is an most important condition to determine if the intagible asset should be amortized?

Answer 7

It MUST have a finite life.

Question 8

How do you account for initial Franchise fees and continuing Franchise fees?

Answer 8

Capitalize the “Initial Franchise Fees” and “Continuing Franchise Fees” would be expense as incurred

Question 9

How do you account for Start-Up costs?

Answer 9

Start up costs should be expensed as incurred

Question 10

What is tax treatment o Start-Up Costs?

Answer 10

Tax rule says that 5,000 is deducted and Balance is amortized over 15 years.

Question 11

What kind of cost is Legal fee for preparing a charter?

Answer 11

Start-Up Costs

Question 12

What kind of cost is legal fee for preparing partnership agreement?

Answer 12

Start-Up Costs

Question 13

What kind of cost is fee for preparing bylaws?

Answer 13

Start-Up Costs

Question 14

What kind of cost is fee for preparing original stock certifications?

Answer 14

Start-Up Costs

Question 15

What kind of cost are filing fees?

Answer 15

Start-Up Costs

Question 16

What kind of cost is associated with opening a new facility?

Answer 16

Start-Up Costs

Question 17

What kind of cost is associated with introducing anew product and services?

Answer 17

Start-Up Costs

Question 18

What kind of cost is associated with Conducting business in new territory?

Answer 18

Start-Up Costs

Question 19

What kind of cost is associated with conducting business with new class of customer?

Answer 19

Start-Up Costs

Question 20

What kind of cost is associated with initiating a new process in existing facility?

Answer 20

Start-Up Costs

Question 21

What kind of costs are associated with Routine, ongoing efforts to refine, enrich or improve the quality of existing product, services, process or facilities?

Answer 21

NOT a Start-Up Cost

Question 22

How do you account for Business mergers or acquisitions?

Answer 22

NOT a Start-Up Cost

Question 23

How do you account for Ongoing customer acquisitions?

Answer 23

NOT a Start-Up Cost

Question 24

How do you account for R&D Expense?

Answer 24

Expense as incurred

Question 25

In R&D project, how do you account for Materials that have alternative future uses?

Answer 25

Capitalize over their useful lives not the life of R&D project. PPE

Question 26

In R&D project, how do you account for Equipment that have alternative future uses?

Answer 26

Capitalize over their useful lives not the life of R&D project. PPE

Question 27

In R&D project, how do you account for Facilities that have alternative future uses?

Answer 27

Capitalize over their useful lives not the life of R&D project. PPE

Question 28

In R&D project, how do you account for R&D costs of ANY NATURE undertaken on behalf of others under contractual agreement?

Answer 28

Treat like INVENTORY, Expense the cost incurred as cost of SALE

Question 29

Why R&D costs of a project undertaken on behalf of other is not expensed as incurred?

Answer 29

Due to high degree of uncertainty of any future benefits.

Question 30

Do you disclose R&D expenses in FS or notes to FS

Answer 30

Disclosure is required in FS and notes to FS of the amount of R&D expenses for the period.

Question 31

Is Marketing Research a R&D Expense?

Answer 31

No. It is not a R&D Expense.

Question 32

Is Quality control testing a R&D Expense?

Answer 32

No. It is not a R&D Expense.

Question 33

Is Reformulation of a chemical compound a R&D Expense?

Answer 33

No. It is not a R&D Expense.

Question 34

Are “Routine Periodic Changes” to old products a R&D Expense?

Answer 34

No. These are manufacturing costs.

Question 35

Are costs associated to “Troubleshooting in production stage” a R&D expenses?

Answer 35

No. These are manufacturing costs.

Question 36

How do you Account for R&D Expense for Computer Software?

Answer 36

• 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

Question 37

How do you account for costs incurred to actually produce the product (software)?

Answer 37

These costs are charged to Inventory

Question 38

How do you report the Capitalized software costs?

Answer 38

They are reported at Lower of cost or market, where market is equal to NRV.

Question 39

How you do account for software development costs incurred after the preliminary project state and for upgrades and enhancement?

Answer 39

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

Question 40

How do you account for a software previously developed for internal use is subsequently sold to outsider?

Answer 40

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.

Question 41

How to determine impairement

Answer 41