Set 4 FR Chapter 9 Goodwill Flashcards
Provide 5 examples of intangible assets
copyrights patents franchise rights trademarks customer lists
3 criteria to define intangible assets
asset is identifable - meaning it can be transferred/sold separately or arising from contractual or legal rights
entity controls the future economic benefits
asset will generate future economic benefits
it must also meet two other criteria to be recognized
probable the expected future economic benefit will flow to the entity
cost can be measured reliably
Acquired intangibles - costs included in cap?
direct costs and costs of prepping asset for use
in combinations, how are intangible assets measured? and goodwill?
FV. goodwill is only measured during business combinations. separated.
is internally generated goodwill recognized?
no, never. ever.
how are intangibles which are provided by government grant accounted for?
can choose to record asset and grant at FV initially. If not done, then intangible can be recognized at a nominal amount, plus costs to prep for use.
if NMT are exchanged, what is the value?
fair value, UNLESS there is no commercial substance OR FV not available. Then use CV.
how are research transactions recorded for internal intangibles?
expensed
in the development stage, it can be capitalized, but what is the criteria that needs to be met first
1) the technical feasibility of completing the intangible asset so that it will be available for use or sale
• Is the asset technically able to be completed?
2) its intention to complete the intangible asset and use or sell it
• Does the entity plan to complete it?
3) its ability to use or sell the intangible asset
• Once completed, does the entity have a use for the asset?
4) how the intangible asset will generate probable future economic benefits — among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset
• When the asset is in use, will it generate economic benefits?
5) the availability of adequate technical, financial, and other resources to complete the development and use or sell the intangible asset
• As the entity plans to complete it, does it have the means to do so? Often this is focused on having the money available to complete the development.
6) its ability to measure reliably the expenditure attributable to the intangible asset during its development
• Does the entity know the costs that are directly attributable so that it can measure the asset?
what costs can be capitalized (when criteria has been met)
- costs of materials/services used to generate the asset
- employee salaries, wages and benefits incurred
- fees for registering legal rights
- amortization of patents and licences used to generate asset
- interest costs
what costs cannot be capitalized
- selling, admin and other general MOH unless it can be directly traced to prepping the asset for use
- inefficiences or operating losses incurred before planned performance
- cost of training
how is subsequent measurement. assets with finite vs infinite life.
usually cost model. can use revaluation, but only for those assets traded on active market (rare). Finite life - amortized over useful life. Infinite life - not amortized.
impairment
annually or when there are indicators of impairment
derecognition
gain/loss recognized in statement of comp income
