Intangibles Flashcards
organization costs
are expensed immediately
Franchise agreement revenue is recognized
only once the franchisor has performed substantially all the material contractual services and collectability is reasonably assured. Because Baker performed all services and there appear to be no concerns about collectability, Baker should recognize the full amount of revenue in the current year.
Under the revaluation model allowed by IFRS
assets are periodically revalued and adjusted to their fair values. Revaluation is required to be done relatively frequently, generally at least every three years, but is not required annually. In between revaluation dates, the asset is amortized and may be written down due to impairment.
amortization
The amount of amortization will be the greater amount when calculated under both the straight-line method and the volume of output approach
straight line = cost/# of yrs
volume output = (current sales/total sales)* cost
following costs incurred in obtaining or developing internal-use software may be capitalized:
External direct costs such as fees paid to third parties for software development, costs of obtaining the software from a vendor, travel expenses incurred by employees associated with developing the software;
Payroll costs for employees for time spent working directly on the internal-use software project;
Interest costs incurred while developing internal-use software.
goodwill impaired
can’t be impaired, no j/e
r and d for computer software
costs incurred in the preliminary project stage as well as costs incurred in training, data conversion and maintenance
Costs incurred after the preliminary project stage for computer software and for upgrades and enhancements,
should be capitalized and amortized on a straight-line basis.
quantitative impairment test of an intangible asset with an indefinite life
fair value and carrying value are compared
Once an impairment loss is recognized
he reduced carrying value is considered the new cost basis and is used for all future impairment tests. Further reductions are recognized as additional impairments but recoveries are NOT recognized.
Costs incurred after reaching technological feasibility but before commercial production, such as the production of product masters
capitalized and amortized.
recoverability test
used to see if CV of intangible will be recovered during its effective useful life.
can only be applied to intangibles with DEFINITE lives
EX: patents
When equipment used in research and development activities has alternative future uses
should be capitalized and depreciated over its estimated useful life
is litigation cost expensed or capitalized if the patent was defended successfully?
capitalized.
research and development cost
are expensed as incurred
