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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Explain how a company accounts for the cost of its intangible assets.

To determine

Describe the manner in which a company would account for its intangible asset.

Explanation

Intangible assets: These are the long-term assets which are not physical in nature, but possess value. The intangible assets would be amortized over their definite useful life or limited useful life, and those with indefinite or unlimited life are not amortized.

When accounting for the cost of intangibles assets (identifiable or unidentifiable), the company distinguishes the assets that are externally acquired and are internally developed.

Externally acquired assets are the assets that are purchased from others or outsiders. All the identifiable intangible assets which are acquired are capitalized. The identifiable intangible assets which are acquired with a limited life are amortized over the useful lives of the asset, whereas the identifiable intangible assets with unlimited lives are reviewed for impairment...

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