Ch 11 Intangible Assets

Question 1

the purchaser in a business combination pays less than the fair value of the identifiable net assets

Answer 1

bargain purchase

Question 2

transaction in which the purchaser obtains control of one or more businesses

Answer 2

business combination

Question 3

a federally granted right that all authors, painters, musicians, sculptors, and other artists have in their creations and expressions

Answer 3

copyright

Question 4

translation of research findings or other knowledge into a plan or design for a new product or process, or for a significant improvement to an existing product or process whether intended for sale or use

Answer 4

development activities

Question 5

if the intangible asset is impaired, the impairment amount is calculated as follows

carrying value of intangible asset - fair value of intangible asset = impairment loss

Answer 5

fair value test

Question 6

a contractual arrangement under which the franchisor grants the franchisee the right to sell certain products or services, to use certain trademarks or trade names, or to perform certain functions, usually within a designated geographical area

Answer 6

franchise

Question 7

__________ is measured as the excess of the cost of the purchase over the fair value of the identifiable net assets (assets less liabilities) purchased

Answer 7

goodwill

Question 8

the write-off of all or part of they carrying value of property, plant, and equipment

Answer 8

impairment

Question 9

If no factors (legal, regulatory, contractual, competitive, or other) limit the useful life of an intangible asset, a company considers its useful life _______. An ______ life means that there is no foreseeable limit on the period of time over which the intangible asset is expected to provide cash flows.

Answer 9

indefinite-life intangibles

Question 10

contain 2 characteristics:
1. lack physical existence
2. not financial instruments

Answer 10

intangible assets

Question 11

operating rights are referred to as …

Answer 11

license (permit)

Question 12

a category of an intangible asset; assets that may expire at some point

the cost of _________ is amortized to expense over its useful life

the useful life should reflect the periods over which the asset will contribute to cash flows

Answer 12

limited-life (finite) intangibles

Question 13

a procedure of valuation

it assumes goodwill covers all the values that cannot be specifically identified with any identifiable tangible or intangible asset

Answer 13

master valuation approach

Question 14

start-up costs include _____, such as legal and state fees incurred to organize a new business entity

Answer 14

organizational costs

Question 15

a __________ gives the holder exclusive right to use, manufacture, and sell a product or process for a period of 20 years without interference or infringement by others

Answer 15

patent

Question 16

the company estimates the future cash flows (undiscounted) expected from the use of the asset and its eventual disposal, then makes the following comparison and conclusions

if the sum of expected future cash flows is greater than the carrying value of the intangible asset, there is no impairment

if the sum of expected future cash flows is less than they carrying value of the intangible asset, there is an impairment loss

Answer 16

recoverability test

Question 17

planned search or critical investigation aimed at discovery of new knowledge

Answer 17

research activities

Question 18

________ are not in themselves intangible assets

________ activities frequently result in the development of patents or copyrights (such as a new product, process, idea, formula, composition, or literary work) that may provide future value

Answer 18

research and development costs

Question 19

_________ are incurred for one-time activities to start a new operation

Answer 19

start-up costs

Question 20

a word, phrase, or symbol that distinguishes or identifies a particular company or product

Answer 20

trademark, trade name