Intangibles Flashcards
Research and Deveolpment
Costs are expenses as incurred
Patent
capitalize costs of successful legal defense
Maximum 20 year useful life, use the shorter of legal or useful life
Legal Rights
Patent
Copyright-life of the creator plus 70 years
Trademark-10 year indefinite renewals
Franchise
Impairment
Test yearly for impairment only if it has an infinite useful life
carrying value-fair value gives you the loss
Goodwill
Created when a business is bought or sold
The difference between the fair value of the consideration given and the fair value of net assets
indefinite useful life tested annually for impairment
2 step process for figuring out goodwill impairment
Step1- Carrying value is greater than fair market value you have impairment
Step2- Difference between Underlying value of net assets and fair value of the reporting unit=impairment loss amount
Relative Sales value approach
current period sales/current period sales + future sales
gives you a ratio which you multiply by carry amount of the software
Computer Software costs
costs prior to feasibility are expensed (R&D)
Costs after feasibility but before commercial sales are capitalize
costs of commercial sales are included in COGS
Amortize software costs
use the greater of straight-line method or relative sales value approach
Accrued Revenue
Hits income statement today
recognized before it is collected
reported as a receivable (asset)
Deferred Expense
hits income statement “tomorrow”
An amount paid prior to recognition on the income statement (prepaid expense)
Accrued expense
expense that was incurred but not yet paid (liability)
Deferred Revenue
Revenue that was received prior to being earned (liability)
Organization Costs
Expensed immediately
