Term
| Two main characteristics of intangible assets: |
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Definition
1) they lack physica existence
2) They are not financial instruments |
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Term
| How are intangible classified? |
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Definition
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Term
| What are the common types of intangibles? |
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Definition
| patents, copyrights, franchises or licenses, trademarks or trade names, and goodwill. |
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Term
| How do you valuate purchased intangibles? |
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Definition
Recorded at cost.
includes all costs necessary to make the intangible asset ready for intended use. |
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Term
| How do you valuate internally created intangibles? |
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Definition
generally expensed.
only capitaize direct costs incurred in developing the intangible such as legal costs. |
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Term
| How would you amoritize a limited life intangible? |
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Definition
Amoritize to expense.
credit asset account or accumulated amorizitation. |
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Term
| How would you amoritize an indefinate life intangible? |
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Definition
no foreseeable limit on time the aset is expected to provide cash flows.
no amorizatation. |
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Term
| How does the impairment test differ over limited life and indefinate life intangibles? |
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Definition
| for limited life you use recoverability test, then fair value test, for indefinate life, use only fair value test. Otherwise, indefinate life will fail recoverability test always. |
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Term
| What are the 6 Categories of intangibles? |
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Definition
1) Marketing related
2) Artistic related
3) Customer related
4) COntract related
5) Good will
6) Goodwill
( good way to remember this is MACCGT) I think of a guy purchasing a big MACC from georgia tech ( GT) |
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Term
| What are marketing related intangible? |
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Definition
examples are trademarks or tradenames, internet domain names, noncompetition
* trademark or trade name has legal protection for indefinate number of 10 year renewal periods.
capitalize acquisition costs
no amorizitation. |
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Term
| What are customer related intangibles? |
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Definition
customer lists, production backlogs, contractual customer relationships, etc.
Capitalize acquisition costs,
amoritze to expense over useful life. |
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Term
| What are artistic related intangibles? |
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Definition
plays, literary works, musical works, pictures, etc.
Copyright granted for the life of the creator pus 70 years |
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Term
| What are contract related intangibles ? |
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Definition
franchising and licensing agreements, construction permits, broadcast rights, etc.
- franchise or license with a limited life should be amoritzed to expense over the life of the franchise.
- franchise with an indefinate life should be carried at cost and not amoritized. |
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Term
| Technology related intangibles: |
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Definition
patented technology, trade secrets granted by U.S. patent and trademark office.
patent gives holder exclusive use for a period of 20 years.
Capitalize costs of purchasing a patent
expense any r and d costs in developing patent
legal fees incurred successfully defending a patent are capitialized to patent account. |
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Term
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Definition
only recorded when an entire business is purchased because goodwill cannot be separated from the business as a while
Goodwill is recorded as the excess of the purchase price over the FMV of the identfiable net assets acquired.
internally created goodwill should not be capitalized. |
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