Intangibles Flashcards

1
Q

Which intangible asset is subject to recoverability test when tested for impairment?

A

PATENT - The recoverability test is applied to definite life intangible test. Impairment loss = CV-FV

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2
Q

Patent is to amortized over what period?

A

Patent should be amortized over shorter of useful or legal life). Patent is generally granted for 20 years and has definite life.

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3
Q

What are trademarks?

A

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

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4
Q

Private company alternative has an amortization period of how many years for GOODWILL?

A

10 Years

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5
Q

True or False: Attorney fees (legal and filing cost) will be added to the cost of the Patent

A

True

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6
Q

At what price is patent recorded?

A

At Fair Value or Market value

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7
Q

Amount spent on developing a new idea for a product that was patented last year is ___________

A

R&D expense

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8
Q

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.

A

True

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9
Q

PERPETUAL

A

Continuously update inventory
Know inventory amount at any point in time

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10
Q

PERIODIC

A

(1) No adjustment to inventory until the end of the period
(2) Must estimate inventory during the year

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11
Q

Capitalize Purchase price (acquired patents, Legal costs associated with obtaining a patent on a new product). Filing Fees.

A
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12
Q

R&D - Research and development (internally developed patents, unsuccessful defense of patent)

A
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13
Q

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

A

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

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14
Q

Cost of developing the patent is not recorded as cost of the patent. It’s irrelevant for financial reporting purpose.

A

Only Cost of the patent is amortized.

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15
Q

Equipment - if it has alternative uses then make JE as research and development expense to record instead of taking it as dep expense

A

True

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16
Q

Intangible asset is impaired if

A

Sum of undiscounted FCF < CVA

Impairment loss = FV <CVA
Impairment loss = FV-CV

17
Q

Copyright

A

Life of the creator plus 70 yrs; amortized over useful life. Protection of artistic works, including books, recordings and computer software.

18
Q

Software - without customization

A

Capitalize and amortize

19
Q

Software - with customization

A

Costs to modify expense as incurred - Before Point of Technological feasibility (expense)

After point of Technological feasibility - Amortize

20
Q

Service contracts get ________

A

expensed in the period benefited