Intangible Assets and Their Accounting

A set of flashcards covering the key concepts related to intangible assets, including definitions and accounting methods.

Intangible Assets

Rights, privileges, and competitive advantages resulting from ownership of long-lived assets without physical substance.

Goodwill

The additional amount paid for an existing business beyond its assets less liabilities.

Amortization

The process of allocating the cost of intangible assets over their useful life.

Limited Life Intangible Asset

An intangible asset whose cost is allocated over its useful life.

Indefinite Life Intangible Asset

An intangible asset that does not have a determinable useful life.

Patent

A legally granted right for an invention, typically lasting 20 years.

Franchise

The right to operate a business using a brand and business model owned by another.

Trademark

A recognizable sign, design, or expression that identifies products or services of a particular source.

Accounting for Intangible Assets

Intangible assets are recorded at cost and categorized based on their useful life.

Straight-Line Amortization

A method of amortizing intangible assets evenly over their useful life.