Intangible Long-Lived Assets - LOS 33.a

Question 1

What are Intangible assets?

Answer 1

They are long-term non-physicla assets e.g. patents, brand-names, copyrights and franchises.

Question 2

How does the cost treatment of finite and infinte assets differ?

Answer 2

Finite-Lived Intangible assets: Amortized over it’s useful life
**Infinte-Lived Intangible assets: **Test for impariment annually - if impaired then the reduction in value is recognised in the Income statement as a loss within the period the impairment is recognised.

Question 3

What characteristics do identifiable intangible assets have?

Answer 3

• Capable of being seperated from the firm / arised form a contractual or legal right
• Controlled by the firm
• Expected to provie future economic benefits

Question 4

What is an unidentifiable intangible asset?

Answer 4

It is an asset that cannot be purchased seperately, and may have an indefinite life.

Question 5

What’s an example of an unidentifiable intangible asset

Answer 5

Goodwill

Question 6

What’s the treatment for Intangible Assets Created Internally?

Answer 6

With some exceptions these are expensed as incurred - exception (under IFRS) are r&d costs and software development costs.

Question 7

How does IFRS treat research costs?

Answer 7

Research cosys - aimed at discovery of new scientific/technical knowledge are expensed as incurred

Question 8

How are development costs treated in IFRS

Answer 8

Dev costs may be capitalized - a firm must show that it can complete the asset and intends to use/sell the completed asset

Question 9

How is R&D Costs treated under US GAAP

Answer 9

Both R&D costs, are generally expensed as incurred, however:
- Costs of creating software for sale may be capitalised when the product technological feasibility has been established
- Costs of creating software for intenral use may be capitalised when until it is probable that the firm will complete the project and use the software as intended.

Question 10

What’s the cost treatment for purchased Intangible assets

Answer 10

Purchased intangible assets are recorded on the Balance sheet at cost - typically it’s fair value at acquisiiton

Question 11

What about if the intangible asset is purchased as part of a group

Answer 11

Total purchase price is allocated and divided to each asset on the basis of it’s fair value