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Flashcards in Intangible Assets Deck (23)
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define intangible asset

An asset that lacks physical substance and provide economic benefits through the rights and privileges associated with their possession


What are the 3 basic forms of intangible assets

1. Knowledge
2. Legal rights & identifiable intangibles
3. Goodwill (unidentifiable intangible)


Are Research and Development (R&D) costs capitalized or expensed

always expensed due to the high level of uncertainty if it will result in anything


what is done with costs in successfully defending a patent?

they are capitalized


what is done with costs in unsuccessfully defending a patent?

they are expensed


what are the 4 major types of intangible legal assets

- patents
- copyrights
- trademarks
- franchises


what life is used for amortization of patents

the shorter of useful or legal life, with a max of 20 years


how long is a copyright period in effect for and over what period of time should they be amortized

the life of the creator plus 70 years (or 95 years total for works made for hire)
Copyrights should be amortized over their useful lives


define leasehold improvements

improvements made by a tenant to long-term lease on real estate property


are leasehold improvements expensed or capitalized

capitalized and amortized over the benefit period. This is the shorter of the useful life or legal life


what are the 3 methods of amortization for intangible assets

- straight line
- units of sales
- net realizable value


define goodwill and in what situations does it occur

The unidentifiable value of a company's brand. It is never carried on the balance sheet unless related to a purchase of a company.


Is goodwill amortized

No, but it is tested annually for impairment


what are the steps in testing for goodwill impairment

1. Determine if the carrying value exceeds fair value. Fair value is the amount that would be received to sell an asset
2. Fair value - value of tangible assets = New goodwill amount. Write down goodwill to match the new amounts


are software costs expensed or capitalized, and if they are capitalized, at what point is that done

software costs incurred before "technological feasibility" (have a working model) are expensed. Software costs after technological feasibility are capitalized


is internally generated goodwill recognized, and if so, what account and financial statement

it is not recognized under either GAAP or IFRS. Goodwill is only created when a company is purchased


are costs incurred to maintain goodwill expensed or capitalized



IFRS - what are the 2 criterion for intangible assets

Must be:
1. based on contractual or legal rights, OR
2. It can be separated from the entity, and sold, transferred, licensed, rented or exchanged


IFRS - Are Research and Development (R&D) costs capitalized or expensed

Research is always expensed, but unlike GAAP development MAY be capitalized if it meets certain criteria


IFRS - What are the 6 criteria that must be met to capitalized development costs

1. Technological feasibility of completing the asset for use or sale has been achieved
2. The entity intends to complete and use or sell the asset
3. The entity has the ability to use or sell the asset
4. The entity understands how the asset will generate probable future economic benefits
5. Technical, financial and other resources are available to complete development of the asset
6. The entity has the ability to reliably measure the expenditures


IFRS - what valuation models can be used for intangible assets

cost model (CM) or revaluation model (RM)
Revaluation model can only be used if determined from an active market


IFRS - do impairment reversals on intangible assets go to OCI or to the income statement if using the cost model (CM)

income statement


IFRS - do impairment reversals on intangible assets go to OCI or to the income statement if using the revaluation model (RM)

other comprehensive income (OCI)