Term
|
Definition
| The allocation of the cost of intangible assets in a systematic way. (p. 667). |
|
|
Term
|
Definition
| A situation, often the result of a market imperfection, in which the purchaser in a business combination pays less than the fair value of the identifiable net assets. (p. 677). |
|
|
Term
|
Definition
| A transaction in which the purchaser gains control of one or more businesses. (p. 666)(n)). |
|
|
Term
|
Definition
| A federally granted right that all authors, painters, musicians, sculptors, and other artists have in their creations and expressions. Granted for the life of the creator plus 70 years, it gives the owner, or heirs, the exclusive right to reproduce and sell an artistic or published work. A copyright is an artistic-related intangible asset. Companies may capitalize the costs of acquiring and defending a copyright. (p. 670). |
|
|
Term
|
Definition
| Activities that translate 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 intended for sale or use. Companies are required to expense the costs of development activities as incurred. (p. 681). |
|
|
Term
|
Definition
| The impairment test for an indefinite-life asset other than goodwill. It compares the fair value of the intangible asset with the assets carrying amount. If the fair value of the intangible asset is less than the carrying amount, a company recognizes an impairment. Companies should test indefinite-life intangibles for impairment at least annually. (p. 677). |
|
|
Term
|
Definition
| A contractual arrangement under which the franchisor grants the franchisee the right to sell certain products or services, to use certain trademarks or trade names, or to perform certain functions, usually within a designated geographical area. A franchise is a contract-related intangible asset. Companies amortize the cost of a franchise with a limited life as operating expense over the life of the franchise, and they also treat as operating expenses any annual payments made under the franchise agreement. (p. 671). |
|
|
Term
|
Definition
| The value of all favorable attributes that relate to a company over and above the cost (purchase price) of the companys identifiable tangible and intangible net assets. Goodwill is often referred to as the most intangible of intangible assets; the only way to sell it is to sell the business. Companies do not amortize goodwill because it is considered to have an indefinite life. (p. 674). |
|
|
Term
| impairment (intangible assets) |
|
Definition
| Measures the extent to which the book value of an intangible asset is greater than the fair value. An impairment is recorded for limited-life intangibles conditional on a recoverability test. Indefinite-life intangibles are assessed for impairment every period based on a fair value test. (p. 677). |
|
|
Term
| indefinite-life intangibles |
|
Definition
| Intangible assets for which there is no foreseeable limit on the period of time over which they are expected to provide cash flows. A company does not amortize an indefinite-life intangible asset but instead assesses it for impairment at least annually. (p. 667). |
|
|
Term
|
Definition
| Assets that lack physical substance and that are not financial instruments. Intangible assets derive their value from the rights and privileges granted to the company using them. They are normally classified as long-term assets. Companies write off (amortize) limited-life intangible assets over their useful lives and they periodically assess indefinite-life intangibles for impairment. (p. 666). |
|
|
Term
|
Definition
| An agreement by which governmental units or agencies grant rights to a privately owned company to use public property in performing its services. Examples are the use of public waterways for a ferry service, the use of public land for telephone or electric lines, and the use of the airwaves for radio or TV broadcasting. A license or permit is a contract-related intangible asset. Companies amortize the cost of a license or permit with a limited life to operating expense over the life of the agreement, and they also treat as operating expenses any annual payments made under the agreement. (p. 671). |
|
|
Term
|
Definition
| Intangible assets judged to have a limited useful life, which reflects the periods over which these assets will contribute to cash flows. Companies amortize limited-life intangibles by systematic charges to expense over their useful lives. (p. 667). |
|
|
Term
| master valuation approach |
|
Definition
| A procedure for valuing goodwill. It assumes that goodwill is the difference between the purchase price for a company and the amount that cannot be specifically identified with any identifiable tangible or intangible assets, less liabilities assumed in the purchase. (p. 676). |
|
|
Term
|
Definition
| Part of start-up costs, such as the legal and state fees incurred to organize a new business entity. Companies expense these costs as incurred. (p. 683). |
|
|
Term
|
Definition
| An exclusive right, granted by the U.S. Patent and Trademark Office, to use, manufacture, and sell a product or process for a period of 20 years without interference or infringement by others. A patent is a technology-related intangible asset. The two principal kinds are product patents, which cover actual physical products, and process patents, which govern the process of making products. Companies amortize the cost of the patent, including purchase price and legal fees needed to obtain or defend a patent, over its legal life or its useful life, whichever is shorter. Any R&D costs related to the development of the patented product or process must be expensed as incurred. (p. 672). |
|
|
Term
|
Definition
| A test to determine whether an impairment of a long-lived asset has occurred. If the sum of the expected future net cash flows (undiscounted) is less than the carrying amount of the asset, the asset is considered impaired. If the test indicates impairment has occurred, the company then computes the amount of the impairment loss to record, based on a fair value test. (p. 677). |
|
|
Term
|
Definition
| Activities that involve planned search or critical investigation aimed at discovery of new knowledge. Companies are required to expense the costs of research activities as incurred. (p. 681). |
|
|
Term
| research and development (R&D) costs |
|
Definition
| Costs incurred in research and development activities. Companies are required to expense the costs of most R&D activities as incurred. (p. 680). |
|
|
Term
|
Definition
| Incurred for one-time activities required to start a new operation. Companies expense start-up costs as incurred. (p. 683). |
|
|
Term
|
Definition
| A word, phrase, or symbol that distinguishes or identifies a particular company or product. A trademark is a marketing-related intangible asset. Under common law, the right to use a trademark or trade name rests exclusively with the original user as long as the original user continues to use it. Registration with the U.S. Patent and Trademark Office provides legal protection for an indefinite number of renewals for periods of 10 years each. Thus, a company that uses an established trademark or trade name may properly consider it to have an indefinite life and do not amortize its cost. (p. 669). |
|
|
Term
| technological feasibility |
|
Definition
| When a company has completed a detailed program design or a working model of a software product. (p. 691). |
|
|
