Intangible Assets

What is an intangible asset?

An asset without physical substance that provides future benefits

Give examples of intangible assets.

Copyrights patents trademarks customer lists franchises goodwill

What is the guiding reporting basis for intangible assets?

Historical cost

How are finite life intangibles expensed?

Through amortization over the shorter of legal or useful life

What does amortization resemble?

Depreciation but applied to intangibles

How is an acquired copyright initially recorded?

At historical cost paid such as $1 million for usage rights

What is the normal amortization method for intangibles?

Straight line

Example amortization: $1 million copyright used 4 years.

$250000 per year

Why is amortization often recorded as a direct reduction to the asset?

Because the legal right itself shrinks over time

How do creators report their own copyrights?

At historical cost less amortization not at market value

What costs are capitalized in acquiring a copyright?

Legal fees filings registration and successful defense costs

Under U.S. GAAP how are intangible assets valued?

Cost less amortization and impairment fair value ignored

Under IFRS what option exists for intangibles?

Revaluation to fair value if active market and updated regularly

What pattern should amortization follow under IFRS?

The pattern of expected economic benefits or straight line if unknown

Why have intangible assets gained importance?

Growth of technology and internet companies where ideas drive value

What are the six categories of intangibles per FASB?

Artistic technology marketing customer contract goodwill

How is goodwill different from other intangibles?

It cannot be separated or amortized but tested for impairment