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Inter. Accting 2
Intangible Assets
| Question | Answer |
|---|---|
| characteristics of intangible assets | lack physical existence (derive value from the rights/privileges granted to the company using them); are not financial instruments |
| purchased intangible assets should be recorded... | at cost |
| internally created intangibles should be... | expensed except for directs costs, which should be capitalized |
| amortization | the allocation of the cost of intangible assets in a systematic way; means depreciation |
| amorization of limited life intangibles | amortize over their useful life (periods over which these assets will contribute to cash flows) |
| amorization of indefinite life intangibles | no amorization |
| impairment test for LLI | recoverability test and then fair value test |
| impairment test for ILI | fair value test |
| Goodwill | measured at the excess of the purchase price over the fair value of the identifiable net assets purchased; only way to sell goodwill is to sell the business |
| recording internally created goodwill | should not be capitalized |
| goodwill write off | companies adjust its carrying value only when goodwill is impaired |
| bargain purchase | the purchaser in a business combination pays less than the fair value of the identifiable net assets; amount is recorded as a gain by the purchaser |
| recoverability test | sum of expected future net cash flows is less than carrying amount(aka book value) of the assets, the company would measure and recognize an impariment loss |
| fair value test | comparing the asset's fair value with its carrying amount; carrying value-fair value=loss on impairment |
| impairment on goodwill (2 step process) | fair value test on reporting unit, then fair value on implied goodwill |
| fair value test on implied goodwill | (implied value of goodwill= fv-nia(excluding goodwill) |
| 2 difficults with accounting for R&D | 1) identifying the costs associated with particular activities and 2) determining the magnitude of the futre benefits and length of time over which such benefits may be realized |
| R&D must be... | expensed when incurred |
| research activites | planned search or critical investigation aimed at discovery of new knowledge |
| development activities | translation of research findings into a design for a new product or process |
| operating losses incurred during the start-up years of a new business should be... | accounted for and reported like the operating losses of any other business |
Created by:
SweetCheeks0707
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