Intangible Assets + their Acquisition Costs

Deferred Payments

1. Some portion of the payments is actually interest ^calculate real cost through present value 2. Fair value of asset is known ^difference in values is recorded in discount on note payable

Self Constructed Assets: 2 issues in identifying the cost

1. determining the amount of the company's indirect manufacturing costs (overhead) to be allocated 2. deciding on the proper treatment of interest (actual or implicit) incurred during construction

Franchises

A contractual arrangement under which a franchisor grants the franchisee the exclusive right to use the franchisor's trademark or tradename and certain product rights. (infinite)

Trademarks (Tradenames)

Exclusive right to display a word, a slogan, a symbol, or and emblem that distinctively identifies a company, product, or a service. (infinite)

Overhead Allocation

Full-cost approach, GAAP all overhead costs are allocated both to production and to self-constructed assets based on the relative amount of a chosen cost driver incurred

Interest Capitalization

Historical cost principle, Matching concept all costs during construction period including interest should be capitalized and then allocated as depreciation during later periods when assets are providing benefits

Intangible Assets

Productive assets that lack physical substance and have long0term but typically uncertain benefits

Copyrights: Acquisition Costs

Purchase price, legal fees, filing fees, not including internal R&D

Patents: Acquisition Costs

Purchase price, legal fees, filing fees, not including internal R&D

Trademarks (Tradenames): Acquisition Costs

Purchase price, legal fees, filing fees, not including internal R&D

Disposition, selling PP&E and Intangible Assets

the seller recognizes a gain or loss for the difference between the consideration received and the book value of the asset sold

GAAP Development Def

the 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 ineded for sale or use.

Donated Assets are recorded at

their fair values

Disposition, retirement

there will be no monetary consideration received. A loss will be recorded for the remaining book value.

FASB's approach to R&D is to...

understate assets and overstate current expense

"Held for Sale"

when PP&E or Intangible Asset is to be disposed of by sale in the near future. Reported at the lower of its book value or fair value less any cost to sell. Not depreciated or amortized

Copyrights

Exclusive right to display a word, a slogan, a symbol, or an emblem that distinctively identifies a company, product, or a service. Life of the creator + 70 years (finite)

Goodwill: Acquisition Costs

Residual Asset, Excess of the fair value of the consideration exchanged for the company over the fair value of the net assets acquired.

Goodwill

The unique value of the company as a whole over and above all identifiable assets.

Patents

Exclusive 20-year right to manufacture a product or use a process (Finite)

Intangible Assets: Acquisition Costs

All expenditures necessary to get the asset in condition and location for its intended use.

Revenue is credited for the amount paid by an unrelated party

Asset Cash Revenue-*donation of asset*

Impairment Loss

"Held for sale" if the fair value less cost to sell is below book value

Assets acquired by issuing common stock are valued at the

fair value of the securities or the fair value of the assets, whichever is more clearly evident

most R&D costs are expensed...

in the periods incurred.

Franchises: Acquisition Costs

Franchise fee plus any legal fees.

GAAP Research Def

planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service or a new process or technique or in bringing about a significant improvement to an existing product or process.