59 Questions
What is a characteristic of intangible assets?
They lack physical existence
How are purchased intangibles typically recorded?
At cost, including necessary expenses to make the asset ready for use
How are internally created intangibles generally accounted for?
Recorded at cost and generally expensed
Which of the following is a common type of intangible asset?
Patents
How are internally created intangibles generally accounted for?
Recorded at cost and generally expensed
What costs are typically included in the valuation of purchased intangibles?
Purchase price, legal fees, and other incidental expenses
What costs are typically included in the valuation of purchased intangibles?
Purchase price, legal fees, and other necessary incidental expenses
How are internally created intangibles generally accounted for?
Recorded at cost and generally expensed
Which of the following is a characteristic of intangible assets?
They lack physical existence
How should limited-life intangibles be amortized?
To expense over useful life
What is the treatment of indefinite-life intangibles?
No amortization
When should companies evaluate limited-life intangibles for impairment?
Regularly, based on events or changes in circumstances
How should limited-life intangibles be amortized?
To expense over useful life
What is the treatment of indefinite-life intangibles?
No amortization
What should companies evaluate limited-life intangibles for?
Impairment
How should limited-life intangibles be amortized?
To expense over useful life
When should companies evaluate limited-life intangibles for impairment?
At least annually
What is the treatment of indefinite-life intangibles?
No amortization
Which of the following is an example of marketing-related intangible assets?
Trademarks
How are marketing-related intangible assets like trademarks typically treated in terms of amortization?
No amortization
What is the treatment of indefinite-life intangible assets in the U.S.?
Indefinite number of 10 year renewal periods
How are marketing-related intangible assets like trademarks typically treated in terms of amortization?
They are not subject to amortization
What is the capitalization and renewal period treatment for marketing-related intangible assets in the U.S.?
Capitalize acquisition costs and renew indefinitely
What is the treatment of indefinite-life intangible assets in the U.S.?
They are not subject to amortization
How are acquisition costs of customer-related intangible assets capitalized?
They are capitalized
How are customer lists typically amortized?
Amortized over the useful life
In the given illustration, how is the purchase of the customer list and the amortization recorded?
Purchase of the customer list and amortization are recorded at the end of each year
How should the acquisition costs of customer-related intangible assets be capitalized?
Amortized over the useful life
What is an example of a customer-related intangible asset?
Order backlog
How should the amortization of customer-related intangible assets be recorded?
Amortized to expense over useful life
How long is the copyright granted for artistic-related intangible assets?
Life of the creator plus 70 years
How should a franchise with an indefinite life be accounted for?
Carried at cost and not amortized
What is an example of a contract-related intangible asset?
Broadcast rights
How long is the copyright granted for artistic-related intangible assets?
Life of the creator plus 70 years
How should a franchise with an indefinite life be accounted for?
Carried at cost and not amortized
What are examples of contract-related intangible assets?
Construction permits and service contracts
How long is the copyright granted for artistic-related intangible assets?
Life of the creator plus 70 years
How should a franchise with an indefinite life be accounted for?
Carried at cost and not amortized
What should be the treatment for limited-life intangibles?
Amortized to expense over the life of the intangible
Which of the following is an example of a marketing-related intangible asset?
Trademark
How are internally created intangibles generally accounted for?
Expensed as incurred
What is the treatment of indefinite-life intangible assets in the U.S.?
Subject to annual impairment testing
What should companies evaluate limited-life intangibles for?
Impairment
How would the unrecovered costs of a successful legal suit to protect the patent generally be reported in the financial statements?
Intangible
What is the correct classification for the cost of developing a patent?
Expense
How should the amount to be reported as research and development expense be computed for the given scenario?
$56,000
What would be the correct classification for the cost of equipment acquired that will have alternative uses in future R&D projects over the next 5 years?
Total R&D Expense
Which intangible asset is renewed every 10 years with no amortization?
Trademarks
How are customer-related intangible assets typically treated?
Amortized over their useful life
What is the treatment of artistic-related intangible assets?
Amortized over their useful life
How are contract-related intangible assets typically amortized?
Amortized over their useful life
What is the purpose of goodwill in accounting?
To represent future economic benefits from acquired assets
How are technology-related intangible assets typically amortized?
Amortized over their useful life
What is the treatment of indefinite-life intangibles?
Tested for impairment annually
How are limited-life intangibles typically amortized?
Amortized over their useful life
What is the excess of purchase cost over the fair value of identifiable net assets acquired known as?
Goodwill
Which of the following is an example of an artistic-related intangible asset?
Plays
What is the main category of intangible assets that includes customer-related assets?
Customer-related
Under IFRS, what is required for some development costs of intangibles?
Capitalization
Study Notes
Intangible Assets Accounting Overview
- Intangible assets include patents, copyrights, trademarks, goodwill, and more.
- Costs to make intangible assets ready for use are capitalized, including purchase price and legal fees.
- Limited-life intangibles are amortized over useful life, while indefinite-life intangibles are tested for impairment annually.
- IFRS requires capitalization of some development costs for intangibles.
- Six major categories of intangible assets include marketing-related, customer-related, artistic-related, contract-related, technology-related, and goodwill.
- Marketing-related intangible assets can include trademarks and trade names, and are renewed every 10 years with no amortization.
- Customer-related intangible assets, like customer lists, are amortized over their useful life.
- Artistic-related intangible assets, such as plays and literary works, are amortized over useful life.
- Contract-related intangible assets, like franchise agreements, are amortized over the life of the franchise.
- Technology-related intangible assets, such as patented technology, are amortized over the patent's useful life.
- Goodwill represents future economic benefits from acquired assets and is recorded in business combinations.
- Goodwill is the excess of purchase cost over the fair value of identifiable net assets acquired.
Test your knowledge of intangible assets with this quiz. Learn about the characteristics and valuation of intangibles such as patents, copyrights, trademarks, and goodwill. Understand how these assets are recorded and classified on the balance sheet.
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