Module 22.5: Intangible Assets

Question 1

What are identifiable intangible assets vs. unidentifiable intangible assets?

Answer 1

identifiable - can be acquired separately or are the result of rights or privileges conveyed to their owner (i.e patents, trademarks, and copyrights).

unidentifiable - cannot be acquired separately and may have an unlimited life (i.e goodwill).

Question 2

Under IFRS, when can the revaluation method be used for intangible assets? Is revaluation permitted under GAAP?

Answer 2

Only be used if an active market for the intangible asset exists.

Not permitted under US GAAP.

Question 3

For research and development costs developed internally, how are they treated under GAAP and IFRS?

Answer 3

GAAP - expensed as incurred

IFRS - determine which is research phase and development phase. research phase is expensed and development phase is capitalized.

Question 4

Under IFRS and GAAP list the five expenses that will always be expensed as they are incurred

Answer 4

1) start up and training costs
2) administrative overhead
3) advertising and promotion costs
4) relocation and reorganization costs
5) Termination costs

Question 5

How can a firm use goodwill to manipulate current quarter net income?

Answer 5

allocating more of the acquisition price to goodwill and less to the identifiable assets. The result is less depreciation and amortization expense, resulting in higher net income.