Problem Solving Survival Guide to accompany Intermediate Accounting, Volume 1: Chapters 1 - 14, 15th Edition

CHAPTER 12

INTANGIBLE ASSETS

OVERVIEW

The balance sheet classification for intangible assets is used to report assets which lack physical existence and are not financial instruments. For instance (1) bank deposits and accounts receivable both are intangible by a legal definition but are financial instruments and are properly classified as current assets for accounting purposes, and (2) investment in stock (or bonds) is intangible in nature but is a financial instrument and should be classified as either a current asset or a long-term investment for accounting purposes. Assets such as patents, trademarks, copyrights, franchises, trade names, subscription lists, licenses, and goodwill are intangible in nature and are classified in the Intangible Assets section of a balance sheet. Intangible assets derive their value from the rights and privileges granted to the company using the assets and are discussed in this chapter.

SUMMARY OF LEARNING OBJECTIVES

1. Describe the characteristics of intangible assets. Intangible assets have two main characteristics: (1) They lack physical existence, and (2) they are not financial instruments. In most cases, intangible assets provide services over a period of years so they are normally classified as long-term assets.
2. Identify the costs to include in the initial valuation of intangible assets. Intangibles are recorded at cost. Cost includes all acquisition costs and expenditures necessary to make the intangible asset ready for its intended use. If ...