Chapter 34 : Identifiable Intangible Assets incurred in securing the trademark such as design cost of the trademark.

If the trademark is
successfully prosecuted or defended, the litigation cost is an outright expense.
1. Define a patent.
 A patent is an exclusive right granted by the government to an inventor enabling him to 5. Explain the amortization and impairment of trademark.
control the manufacture, sale or other use of invention for a specified period of time. The  Trademark is not amortized but tested for impairment at least annually and whenever there
legal life of patent is 20 years, and it cannot be renewed but the life can be extended beyond is an indication that it may be impaired.
the legal life by a new patent for improvements and changes. Under US GAAP, a patent is
classified as technology-based intangible asset. 6. Define a copyright.
 A copyright is an exclusive right granted by the government to the author, composer or artist
2. Explain the cost of patent. enabling the grantee to publish, sell or otherwise benefit from the literary, musical or artistic
 If the patent is acquired by purchase, the cost compromises purchase price, import duties, work. Under US GAAP, a copyright is considered an artistic related intangible asset.
nonrefundable purchase taxes and any directly attributable cost of preparing the asset for  The cost assigned to copyright consists of all expenses incurred in the production of the
the intended use. work including those required to establish or obtain the right.
 If the patent is internally developed, the cost normally includes the licensing and other  When a copyright is purchased, the cost includes the cash paid plus directly attributable cost
related legal fees in securing the patent rights. As a rule, all related research and necessary for the intended use.
development costs shall be expensed as incurred. However, from the time technological
feasibility, any additional development cost to develop the patent to full manufacturing stage 7. Explain the amortization and impairment of copyright.
may be capitalized as patent cost or separately accounted for as development cost.  Theoretically, the cost of the copyright shall be amortized over the useful life. The useful life
is that period in which benefits, sales and royalties are expected. In practice, it is often
3. Explain the amortization and impairment of patent. difficult to estimate the number of years in which benefits will be received. Thus, it is usually
 Since a patent is an intangible asset with finite useful life, the cost is amortized and shall be advisable to write off the cost of the copyright against the revenue of the first printing.
tested for impairment whenever there is an indication of impairment at the end of reporting  The term of protection or legal life for copyright is during the life of the author and for 50
period. years after death. The copyright should be reviewed for impairment by assessing at the end
 If a patent is internally developed, the original cost shall be amortized over the legal life or of each reporting period whether there is an indication that I may be impaired.
useful life, whichever is shorter.
 If the patent is acquired by an entity from an original patentee, the cost shall be amortized 8. Define a franchise.
over the remaining legal life or useful life whichever is shorter.  Under a franchise agreement, one party called the franchisor grants certain rights to another
 If a competitive patent is acquired to protect an original patent, the cost of the competitive party called the franchisee. Under US GAAP, a franchise is a contract-based intangible
patent shall be amortized over the remaining life of the old patent. asset. The franchise agreement may be between the government and a private entity or
 If a related patent is acquired in order to extend the life of the old patent, the cost of the individual and maybe between private entities or individuals.
related patent and any unamortized cost of the old patent shall be amortized over the  If the franchise is between the government and a private entity or individual, the latter is
extended life. permitted to use public property in performing the services.
 If there is no extension of life, the new patent shall be amortized over its own life, and the  If the franchise is between private entities or individuals, the franchisee acquires the right to
cost of the old patent is to be amortized over the remainder of its life. use the trademark, patent and process of the franchisor.

4. Define a trademark. 9. Explain the amortization and impairment of franchise.

 A trademark is a symbol, sign, slogan or name used to mark a product to distinguish it from  If the franchise is granted for a definite period, the cost of the franchise shall be amortized
other products. It is also called tradename or brandname. Under US GAAP, a trademark is a over the useful life or definite period whichever is shorter and is tested for impairment at the
market-related intangible asset. end of reporting period when there is an indication that it may be impaired.
 When a trademark is purchased, the cost includes the purchase price plus costs directly  If the franchise is granted indefinitely or perpetually, the cost of the franchise shall not be
attributable to the acquisition. When a trademark is internally developed, the cost includes amortized but tested for impairment at least annually.
expenditures required to establish it, including filing fees, registry fees, and other expenses
10. Explain initial franchise fee and periodic franchise fee.
 The initial franchise fee or the initial cost of the franchise includes the lump sum payment for
the acquisition of the franchise plus directly attributable costs necessary for the intended use,
such as legal fees and expenses incurred in connection with the acquisition of the right.
 Periodic franchise fee is the periodic payment if the franchise agreement requires the
franchisee to make periodic payment to the franchisor, and such payment is expensed
outright.

11. Explain leasehold improvement and depreciation of leasehold improvement.

12. Explain a customer list.
13. Explain the amortization and impairment of customer list.
14. Explain the accounting treatment of organization cost.
15. Explain the accounting treatment of website development cost.