Intangibles Flashcards
Which intangible asset is subject to recoverability test when tested for impairment?
PATENT - The recoverability test is applied to definite life intangible test. Impairment loss = CV-FV
Patent is to amortized over what period?
Patent should be amortized over shorter of useful or legal life). Patent is generally granted for 20 years and has definite life.
What are trademarks?
Trademarks provide legal protection for the exclusive use of an identifying word, phrase, symbol or design. It must be renewed every 10 years. It may have an indefinite life if there are no legal or economic factors. Since TRADEMARK is RENEWABLE - it has INDEFINITE LIFE
Private company alternative has an amortization period of how many years for GOODWILL?
10 Years
True or False: Attorney fees (legal and filing cost) will be added to the cost of the Patent
True
At what price is patent recorded?
At Fair Value or Market value
Amount spent on developing a new idea for a product that was patented last year is ___________
R&D expense
A disadvantage of the periodic inventory system is that the COGS amount used for financial reporting purposes includes both the cost of inventory sold and inventory shortages.
True
PERPETUAL
Continuously update inventory
Know inventory amount at any point in time
PERIODIC
(1) No adjustment to inventory until the end of the period
(2) Must estimate inventory during the year
Capitalize Purchase price (acquired patents, Legal costs associated with obtaining a patent on a new product). Filing Fees.
R&D - Research and development (internally developed patents, unsuccessful defense of patent)
HTM - Impairment (rule of Conservatism).
Ques - A CO. HAS A $100,000 HTM with an unamortized premium of $2,775 and an allowance for credit loss of $1,500. The net amount reported on the balance sheet would be the _________
JE for impairment
CECL - Current Expected CREDIT LOSS model (IS): If sum of the PV of Future Cash flows is less than the AMORTIZED COST
Ans - FV 100000+Premium 2,775 = CV 102,775
CV - Allowance for credit loss = 102,775 -1500
BS = $101,275
JE
Credit loss expense (IS) XXX
Investment in HTM securities - allowance for credit losses XXX
Cost of developing the patent is not recorded as cost of the patent. It’s irrelevant for financial reporting purpose.
Only Cost of the patent is amortized.
Equipment - if it has alternative uses then make JE as research and development expense to record instead of taking it as dep expense
True