Intangibles Flashcards
means that the asset lacks physical substance
intangible
2 types of intangibles
- intangible (identifiable)
- goodwill
intangible assets
- patent
- copyright
- trademarks
- customer list
- franchise
- license
enables holder to use, manufacture, sell, and control the item or activity
patent
who has exclusive right to recognize U.S. patents
U.S. patent office
patent usually good for
20 years
cost of obtaining a patent
capitalized or not capitalized
capitalized
- fee we pay to U.S. patent office
- hire an outside lawyer
costs of developing the patentable technology
capitalized or not capitalized
do not capitalized
- salaries paid to engineers
- internal lawyer who handles patenting
- right to reprint, sell, or distribute copies and to perform and record the work
- form of protection given by law to authors of literary, musical, artistic, and similar works
- finite lived
copyright
how longs a copyright good for
life of the author plus 70 years
- name, symbol, or distinctive identity given to a company, product, or service
- finite or indefinite lived
trademarks
how long can trademarks last
can be renewed for successive 10 year periods
- compilation of ucstomer information including names and contact information
- finite or indefinite lived
customer list
grantd by franchiser for the right use a particular name and offer specified services and products
- restaurants, hotels, repair shops
- finite lived
franchise
contractual operating rights
license
either finite or indefinite-lived
when developed internally capitalize at
purchase price
either finite or indefinite-lived
when acquired/ purchased capitalize at
purchase price => fair value
amortize over the short or legal or useful life
finite-lived
journal entry for finite-lived
Dr. amortization expense (-SE)
Cr. asset (patent)
do not amortize
indefinite-lived
compare carrying value (book value) to fair value
impairment
3 steps to disposing of intangibles
- amortize the asset up to the date of disposal
- calculate gain or loss
- remove the carrying value
arises when a company acquires another company and the purchase price exceeds the fair value of the identifiable net assets acquired in the purchase
goodwill
assets identified in the acquisitions during goodwill
- all intangible assets (inventory, ppe)
- financial assets (ar, investments)
- identifiable intangible assets (patents, copyrights)
- reputation
- desirable physical location
- workforce
- trade secrets
- synergies
- overpayments
6 examples of things left that we cannot identify as assets during goodwill
when preparing the goodwill impairment, we compare the carrying value of the division to the fair value of the
division
when preparing the goodwill impairment of identifiable intangibles, we compare the carrying value of the asset to the fair value of the
asset
