Intangible Assets.docVIP

Intangible Assets A. Classification--intangible assets are assets that derive their value from the rights and privileges granted to their owner, are long-term in nature, and lack physical substance B. Valuation 1. Cost--cost is the cash or cash equivalent price of obtaining the intangible asset and making it ready for its intended use a. Purchased Intangibles--the cost of a purchased intangible asset is determined in essentially the same way as the cost of property, plant, and equipment b. Internally-created Intangibles--the cost of an internally-created intangible asset includes only the direct costs incurred in obtaining the intangible asset, such as legal fees, registration fees, etc. 1) Research and Development Costs--all research and development costs are expensed when incurred 2. Special Considerations a. Marketing-related Intangible Assets--marketing-related intangible assets are those intangible assets that are used in the marketing or promotion of products or services (such as trademarks or trade names, newspaper mastheads, internet domain names, and noncompetition agreements) 1) Purchased Intangibles--the capitalizable cost of a purchased marketing-related intangible asset is its purchase price plus any costs incurred in a successful legal defense of it a) Illustration--a corporation purchased a trademark at a cost of $400,000; the corporation incurred costs of $50,000 to successfully defend the trademark Trademark = 400,000 + 50,000 = 450,000 2) Internally-created Intangibles--the capitalizable cost of an internally-created marketing-related intangible asset includes legal f