Chapter 12

  1. Definition of Intangible Assets
    They lack physical existence and they are not financial instruments

    They provide benefits over a period of years and thus are classified as long-term assets
  2. How are intangible assets recorded?
    They are recorded at cost, which includes all acquisition costs plus expenditures to make the asset ready for its intended use.
  3. Amortization
    The allocation of cost of intangible assets in a systematic way

    Only limited-life intangibles are amortized.
  4. Goodwill
    The excess of purchase price over the FMV of the identifiable net assets acquired

    Has an indefinite life and is not amortized, but can be adjusted if impaired
  5. Computation of goodwill
    Assets - liabilities = Net assets

    less purchase price = goodwill
  6. Journal entry for goodwill
    Debit the acquisition of each asset and goodwill

    Credit A/P or cash etc.
  7. How is the impairment of limited-life intangibles handled?
    Same as PPE, use the recoverability test and then journalize

    • loss on impairment
    • intangible

    according to the FMV

    These impairments cannot be restored
  8. How is the impairment of indefinite-life intangibles handled?
    The recoverability test is NOT used, only the FV test: compare the carrying value with FMV and record a loss on impairment if FMV < carrying value
  9. Research and Development costs
    Expense when incurred
Card Set
Chapter 12
Intangible Assets