Acct 551 Homework Week 1
Chapter 12 Homework Questions
Q1. What are the two main characteristics of intangible assets?
The two main characteristics of intangible assets are: (a) they lack physical substance. (b) they are not a financial instrument.
Q4. Why does the accounting profession make a distinction between internally created intangibles and purchased intangibles?
When intangibles are created internally, it is often difficult to determine the validity of any future service potential. To permit deferral of these types of costs would lead to a great deal of subjectivity because management could argue that almost any expense could be capitalized on the basis that it will increase future benefits. The cost of purchased intangibles, however, is capitalized because its cost can be objectively verified and reflects its fair value at the date of acquisition.
Q6. What are factors to be considered in estimating the useful life of an intangible asset?
Factors to be considered in determining useful life are: (a) The expected use of the asset by the entity. (b) The expected useful life of another asset or a group of assets to which the useful life of the intangible asset may relate. (c) Any legal, regulatory, or contractual provisions that may limit useful life. (d) Any legal, regulatory or contractual provisions that enable renewal or extension of the asset’s legal or contractual life without substantial cost. (e) The effects of obsolescence, demand, competition, and other economic factors. (f) The level of maintenance expenditure required to obtain the expected future cash flows from the asset.
Q11. Explain the difference between artistic-related intangible assets and contract-related intangible assets.
Artistic-related intangible assets involve ownership rights to plays, pictures, photographs, and video and audiovisual material. These ownership rights are protected by copyrights.
Contract related intangible assets represent
Q1. What are the two main characteristics of intangible assets?
The two main characteristics of intangible assets are: (a) they lack physical substance. (b) they are not a financial instrument.
Q4. Why does the accounting profession make a distinction between internally created intangibles and purchased intangibles?
When intangibles are created internally, it is often difficult to determine the validity of any future service potential. To permit deferral of these types of costs would lead to a great deal of subjectivity because management could argue that almost any expense could be capitalized on the basis that it will increase future benefits. The cost of purchased intangibles, however, is capitalized because its cost can be objectively verified and reflects its fair value at the date of acquisition.
Q6. What are factors to be considered in estimating the useful life of an intangible asset?
Factors to be considered in determining useful life are: (a) The expected use of the asset by the entity. (b) The expected useful life of another asset or a group of assets to which the useful life of the intangible asset may relate. (c) Any legal, regulatory, or contractual provisions that may limit useful life. (d) Any legal, regulatory or contractual provisions that enable renewal or extension of the asset’s legal or contractual life without substantial cost. (e) The effects of obsolescence, demand, competition, and other economic factors. (f) The level of maintenance expenditure required to obtain the expected future cash flows from the asset.
Q11. Explain the difference between artistic-related intangible assets and contract-related intangible assets.
Artistic-related intangible assets involve ownership rights to plays, pictures, photographs, and video and audiovisual material. These ownership rights are protected by copyrights.
Contract related intangible assets represent