Chapter 12: Intangible Assets Intangible assets: lack physical substance, are subject to a high degree of uncertainty concerning future benefits. Examples: patents, copyrights, franchises, goodwill, organization costs, trademarks. The same accounting issues relating to plant assets also apply to intangibles. However, by their nature intangibles are often more difficult to identify, value, and estimate a useful life. Intangibles can be categorized according to: - whether they
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Other intangible assets may be so amortized and deducted from earnings in the determination of income tax liability. Even in the simplest of times, thus, a firm can attain income tax savings to the extent that it can successfully classify intangible assets as something other than goodwill. Thus, it is entirely possible that the GEC Ltd. auditors reclassified some portion of the goodwill account of AEI Ltd. to some other form of intangible asset, and then effected further adjustments to reclassify
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2/08/2013 Lecture 2 – Intangible assets ACCY 902, Semester 2, 2013 A/Professor Indra Abeysekera University of Wollongong, Australia 1 A/Professor Indra Abeysekera Deegan Chapter 8 Relevant accounting standards : AASB 138 2 A/Professor Indra Abeysekera Learning objectives 1. Understand the classes of intangibles (internally-generated and purchased) and how to account for them Understand a special case of intangible – research and development, and how to account for them
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Company hires an accounting intern who says that intangible assets should always be amortized over their legal lives. * Is the intern correct? No, this is incorrect. Intangible assets should not “always” be amortized over their legal lives. * Explanation Intangible assets are defined as Rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess physical substance. The intangible assets are amortized over the established legal life
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Goodwill is an intangible asset described differently amongst different professionals in history. Professor Dicksee, author of many different accounting manuals has defined goodwill as “When a man pays for goodwill, he pays for something which places him in the position of being able to earn more than he would be able to do by his own unaided efforts.” Lord Lindley has been quoted of saying “The term goodwill is generally used to denote benefit arising from connections and reputation.” Lord Macnaghten
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Polluter will determine what type of asset they will classify the EAs as on their balance sheet. Following are three alternatives Polluter can consider as outlined in Deloitte’s “Accounting for Emission Rights” paper: 1. The EAs are intangible assets as defined under SFAS No. 142, Goodwill and Other Intangible Assets, because they lack physical substance but do not meet the definition of a financial asset under SFAS 140. 2. EAs are listed as financial assets because markets and exchanges for
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In accounting, goodwill is an intangible asset associated with a business combination. Goodwill is recorded when a company acquires (purchases) another company and the purchase price is greater than the combination or net of 1) the fair value of the identifiable tangible and intangible assets acquired, and 2) the liabilities that were assumed. Goodwill is reported on the balance sheet as a noncurrent asset. Since 2001, U.S. companies are no longer required to amortize the recorded amount of goodwill
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beginning of 2001 to the beginning of 2004, the long-term debt increased from 3% to 23%. * The same time, current assets and current liabilities dropped from 40% to 23% and from 23% to 9%, respectively. Table #2. The decrease of current assets and current liabilities shows that the actual business activities of company declined as well, contrary to the sharp growth of intangible assets (Table #2). Table #3. * The negative changing of Balance Sheet Structure over 2000-to 2004 influenced
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transactions, one undertaken and one planned, are twofold: International standards under IFRS and domestic U.S. standards under U.S. GAAP. Relevant facts: * Tom agrees to purchase Rural Life Supply Co. for $150 million in exchange for: * Assets of Rural Life Supply Co. that include: * Exclusive supplier contract of farming equipment with Farming Depot and non-contractual customer relationship with Farming Depot for routine purchases of power tools. * Exclusive supplier
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continuously renew it. The annual impairment test shows the net assets (i.e. the carrying amount) of this reporting unit are $4,000,000, which includes intangible assets of $2,200,000, a trademark of $400,000, and goodwill of $1,400,000. The fair value of the reporting unit is considered to be $3,400,000, which includes tangible assets of $2,200,000, the trademark valued at $300,000, and internally developed, unrecognizable intangible patent valued at $100,000. Express expects the division to generate
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