Wiley Ch12 Intangible Asset 是非題

15. If the fair value of an unlimited life intangible other than goodwill is less than its book value, an impairment loss must be recognized.

Ans: T OK 1)The impairment test for an indefinite-life asset other than goodwill is a fair value test. 2)If the fair value is less than the carrying amount, the company recognizes an impairment. 3)Companies use this one-step test because many indefinite-life assets easily meet the recoverability test (because cash flows may extend many years into the future).

20. Contra accounts must be reported for intangible assets in a manner similar to accumulated depreciation and property, plant, and equipment.

Ans: F OK 1) Contra accounts are not normally shown for intangibles on the balance sheet. 2) Contra accounts are intended to have its balance be the opposite of the normal balance for that account classification. 3) The role of contra accounts is nothing similar to accumulated depreciation.

11. Goodwill is considered a master valuation account because it measures the value of specifically identifiable intangible assets.

Ans: F OK 1) Goodwill is considered a master valuation account because Goodwill is measured as a residual rather than measured directly 2)Goodwill is the the excess of cost over fair value of the identifiable net assets acquired. 3)It is often called "the most intangible of the intangible assets" because it is identified only with the business as a whole. The only way to sell goodwill is to sell the business.

17. The rules used to account for impairments of limited-life intangible assets are different from the rules used to account for impairments of plant and equipment.

Ans: F OK 1) The rules that apply to impairments of property, plant, and equipment also apply to limited-life intangibles. 2)A company should review property, plant, equipment, and intangible assets for impairment at certain points 3)In performing recoverability test, the company estimates the future cash flows expected from use of the asset and its eventual disposal.

19. The same recoverability test that is used for impairments of property, plant, and equipment is used for impairments of indefinite-life intangibles.

Ans: F OK 1) there is no recoverability test for indefinite-life intangible assets- they might never fail the undiscounted cash flows recoverability test because cash flows could extend indefinitely into the future. 2)Only the fair value test is performed for indefinite-life intangibles 3)Companies use fair-value test on indefinite-life intangibles because many indefinite-life assets easily meet the recoverability test

21. Research and development costs that result in patents may be capitalized to the extent of the fair value of the patent.

Ans: F OK 1)All costs incurred in the research phase are expensed as incurred. Once a project moves to the development phase, certain development costs are capitalized. 2)Some argue that the R&D costs to create intangibles bear no relationship to their real value, therefore expensing R&D cost is appropriate. 3)Others note that it is difficult to associate internal costs with a specific intangible. companies capitalize only direct costs in developing the intangible, such as legal costs, and expense the rest.

4. Amortization of limited-life intangible assets should not be affected by expected residual values.

Ans: F OK 1)Amortization of limited-life intangible assets should be affected by expected residual values. 2)The amount of an intangible asset to be amortized should be its cost less residual value. The residual value is assumed to be zero unless at the end of its useful life the intangible asset has value to another company. 3)For example, if Company A commits to purchasing an intangible asset from compnay B. at the end of the asset's useful life, company B should reduce the cost of its intangible asset by the residual value. Similarly, company B should consider fair values, if reliably determined, for residual values.

8. The cost of a purchased patent should be amortized over the remaining legal life of the patent.

Ans: F OK 1)Companies should amortize the cost of a patent over its legal life or its useful life (the period in which benefits are received), whichever is shorter. 2)A patent 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. 3)For example, If a company owns a patent from the date it is granted and expects the patent to be useful during its entire legal life, the company should amortize it over 20 years. If it appears that the patent will be useful for a shorter period of time, say for five years, it should amortize its cost over five years. Changing demand, new inventions superseding old ones, inadequacy, and other

2. Internally generated intangible assets are initially recorded at fair value.

Ans: F OK 1)Even though an intangible asset such as Coca-Cola's logo carries huge name recognition value, it does not appear on the company's balance sheet "because the logo was developed internally and does not have a price that can be used to assign fair market value, as would be the case had the logo been part of the acquisition of another firm." 2) Internally developed intangible assets do not appear as such on a company's balance sheet. 3)intangible assets are only listed on a company's balance sheet if they are acquired assets and assets with an identifiable value and useful lifespan that can thus be amortized 4)Intangible assets with a theoretically infinite life, such as goodwill, cannot be amortized and therefore do not appear on the company's balance sheet. -------------------------------------------------------------------------------------- 1)Internally created intangibles: companies capitalize only direct costs incurred in developing the intangible, such as legal costs, and expense the rest. 2)Internally created intangibles, company should follow a conservative approach-record expense when incurred. 3)Purchased intangibles: the cost of the intangible is the fair value of the consideration given or the fair value of the intangible received, whichever is more clearly evident.

13. Internally generated goodwill associated with a business may be recorded as an asset when a firm offer to purchase that business unit has been received.

Ans: F OK 1)Goodwill generated internally should not be capitalized (record a cost as an asset) in the accounts. 2)Measuring the components of goodwill is simply too complex, and associating any costs with future benefits is too difficult. 3)goodwill is recorded only when an entire business is purchased. Goodwill is the residual—the excess of cost over fair value of the identifiable net assets acquired

6. If a company develops a trademark, it should expense the costs related to attorney fees, registration fees, and design costs.

Ans: F OK 1)If a company develops a trademark or trade name, it capitalizes costs related to secure it, such as attorney fees, registration fees, design costs, consulting fees, and successful legal defense costs. 2)It excludes research and development costs. When the total cost of a trademark or trade name is insignificant, a company simply expenses it. 3)A trademark or trade name is a word, phrase, or symbol that distinguishes or identifies a particular company or product.

25. Periodic alterations to existing products are an example of research and development costs.

Ans: F OK 1)R&D activities do not include routine or periodic alterations to existing products 2)Although periodic alterations may represent improvements, it's not a part of R&D 3)R&D include new products, new idea, new process, or a significant improvement,

22. Research and development costs are recorded as intangible assets if they will provide economic benefits in future years.

Ans: F OK 1)R&D costs from that point forward, when economic economic benefits will flow to the company, meet the recognition criteria and should be recorded as an intangible asset. 2)All costs incurred in the research phase are expensed as incurred. 3)In summary, companies expense all research phase costs and some development phase costs. Certain development costs are capitalized once economic viability criteria are met

18. If fair value of an impaired asset recovers after an impairment has been recognized, the impairment may be reversed in a subsequent period.

Ans: F OK 1)Under GAAP, impairment losses cannot be reversed for assets to be held and used. 2)If a review in a future year indicates that an intangible asset is no longer impaired because the recoverable amount of the asset is higher than the carrying amount: the impairment loss may be reversed. 3)The impairment loss results in a new cost basis for the asset.

23. GAAP requires start-up costs and initial operating losses during the early years to be capitalized.

Ans: F OK 1)GAAP requires that operating losses during the early years should not be capitalized. 2)the accounting and reporting standards should be no different for an enterprise trying to establish a new business than they are for other enterprises 3)Even some argue that such operating losses are an unavoidable cost of starting a business.

24. Material, labor, and overhead costs incurred in developing a new product are to be expensed as these are development costs.

Ans: T OK 1) Accounting treats material, labor, and overhead as Expense immediately as R&D. 2)Research and development activities may include (a)personnel costs, (b) materials and equipment costs, and (c) indirect costs. 3)Material to be expensed the entire costs, unless the items have alternative future uses (in other R&D projects or otherwise).

16. After an impairment loss is recorded for a limited-life intangible asset, the carrying amount becomes the basis for the impaired asset and is used to calculate amortization in future periods.

Ans: T OK 1) After recognizing the impairment, the reduced carrying amount of the patents is its new cost basis. 1) the remaining carrying amount should be amortized over the revised remaining useful life. 3) The impairment loss is the carrying amount of the asset less the fair value of the impaired asset.

7. The cost of acquiring a customer list from another company is recorded as an intangible asset.

Ans: T OK 1) Customer-related intangible assets result from interactions with outside parties 2) Examples include customer lists, order or production backlogs, and both contractual and noncontractual customer relationships. 3) Journal entry for acquiring a customer list is in pic

5. Some intangible assets are not required to be amortized.

Ans: T OK 1) Indefinite-life intangible assets are not required to be amortized. 2)indefinite life means that there is no foreseeable limit on the period of time over which the intangible asset is expected to provide cash flows. A company does not amortize an intangible asset with an indefinite life. 3)Companies should test indefinite-life intangibles for impairment at least annually.

10. In a business combination, a company assigns the cost, where possible, to the identifiable tangible and intangible net assets, with the remainder recorded as goodwill.

Ans: T OK 1)Goodwill is measured as the excess of the cost of the purchase over the fair value of the identifiable net assets (assets less liabilities) purchased. 2)For example, if Portofino paid $2,000,000 to purchase Aquinas's identifiable net assets (with fair value of $1,500,000), Portofino records goodwill of $500,000. 3)Goodwill is therefore measured as a residual rather than measured directly. That is why goodwill is sometimes referred to as a plug, a gap filler, or a master valuation account.

9. If a new patent is acquired through modification of an existing patent, the remaining book value of the original patent may be amortized over the life of the new patent.

Ans: T OK 1)If the new patent provides essentially the same benefits, a company can apply the unamortized costs of the old patent to the new patent. 2)For example, Astra Zeneca plc filed for additional patents on minor modifications to its heartburn drug Prilosec. The effect may be to extended to the life of the old patent. 3)If a patent becomes impaired because demand drops for the product, the asset should be written down or written off immediately to expense.

14. All intangibles are subject to periodic consideration of impairment with corresponding potential write-downs.

Ans: T OK 1)In some cases, the carrying amount of a long-lived asset (property, plant, and equipment or intangible assets) is not recoverable. 2)A company uses recoverability test to estimate the future cash flows expected from use of the asset and its eventual disposal. If the sum of the expected future net cash flows (undiscounted) is less than the carrying amount of the asset, the company would measure and recognize an impairment loss. 3)A company needs to record a write-off.

3. Limited-life intangibles are amortized by systematic charges to expense over their useful lives.

Ans: T OK 1)The allocation of the cost of intangible assets in a systematic way is called amortization. Intangibles have either a limited (finite) or an indefinite useful life. 2)company amortizes limited-life intangible assets such as copyrights on its movies and licenses related to its branded product. 3)company does not amortize indefinite-life intangible assets such as trade name or its Internet domain name.

12. Internally generated goodwill should not be capitalized in the accounts.

Ans: T OK 1)Measuring the components of goodwill is simply too complex, and associating any costs with future benefits is too difficult. 2)The future benefits of goodwill may have no relationship to the costs incurred in the development of that goodwill 3)Finally, because there is no objective transaction with outside parties, Subjectivity—even misrepresentation—may occur.

1. Intangible assets derive their value from the right (claim) to receive cash in the future.

Ans:F OK 1)Intangible assets lack physical existence: Intangible assets derive their value from the rights and privileges granted to the company using them 2)Financial instrument derive their value from the right to receive cash or cash equivalents in the future. .3)Intangible assets are not financial instrument.