Professional Documents
Culture Documents
R&D Intangibles
R&D Intangibles
R & D Costs
• Any item considered an R&D cost must be EXPENSED AS INCURRED
EXAM HINT: Once the company is doing anything related to the actual production of the item, they
are no longer considered in the R&D phase (e.g. “setup costs for production” are not considered R&D)
INTANGIBLE ASSETS
What should be Capitalized?
1. Purchase Price
2. Legal & Other Fees to register the intangible
3. Legal Fees in successful defense of an intangible
a. Note: unsuccessful defense = expense in current period
Goodwill à Only thing for goodwill to capitalize is excess paid over FMV
• Developing, maintain, enhance, restore, etc… are all EXPENSED AS INCURRED!!!
• Test of impairment at the reporting unit level
• Reversal of impairment loss à PROHIBITED IN ALL CASES
Amortization
Finite useful life (copyright, patent, leasehold improvement, etc…)
• Must amortize over the best estimate of its useful life
• Must consider legal, regulatory, biz needs, economic life, etc…
Internal Use
• Expense: Preliminary project stage (conceptual formulation and evaluation of alternatives,
determination of existence of needed technology, and final selection of alternatives)
• Expense: Training costs and data conversion costs
• Capitalize: Design, coding, installation, testing (cease when product is complete)
**Note: Exchange of a fund asset for another (cash to investment) does not affect the net balance of the
fund!
Leasehold improvementsu
• Includes construction of a building in liue of rent, which reverts to lessor @ end
o In this case, depreciate (amortize, actually, since its a leasehold improvement) over
remaining life with no salvage value taken into account