Course Project Week 7
Patent costs treatment and impairment testing on patents
Ying Wampler
Keller Graduate School of Management of DeVry University
ACCT540
Dr. Racic
Patent costs treatment and impairment testing on patents
Patent costs treatment and impairment testing on patents
Introduction
XYZ Research Company was incorporated in 2010 and their business mainly focuses on developing new technology for interplanetary exploration. Due to the nature of their business, the majority of their business costs are considered as research and development costs. Research and development costs will be defined later in the body of the paper. The company owns quite a few patents and has always expensed all of the costs that were associated with obtaining their patents. A patent legally prohibits others from producing a product and allows the holder to sell the rights to produce the underlying goods to other businesses (Cromwell, 2015). It makes sense to expense patent costs as incurred since there can be no guarantee of any specific patent application being granted, nor of any commercial value being achievable from the granting of a specific patent (Westbrook, 2013). The owners of the company are unsure if any or all of their patent costs can be capitalized and if any impairment testing should be done periodically on their patents.
This literature review considers whether or not a company should capitalize patent costs and whether or not impairment testing should be done periodically on patents by responding to the following questions:
1. What are patent costs?
2. What kind of patent costs can be capitalized and what kind of patent costs can be expensed?
3. What is impairment?
4. Is impairment testing required on patents? If so, how often?
What are patent costs? If a company files for a patent application, this cost will include the registration, documentation, and other legal fees associated with the application (Bragg, 2012). If the company instead bought a patent from
Ying Wampler
Keller Graduate School of Management of DeVry University
ACCT540
Dr. Racic
Patent costs treatment and impairment testing on patents
Patent costs treatment and impairment testing on patents
Introduction
XYZ Research Company was incorporated in 2010 and their business mainly focuses on developing new technology for interplanetary exploration. Due to the nature of their business, the majority of their business costs are considered as research and development costs. Research and development costs will be defined later in the body of the paper. The company owns quite a few patents and has always expensed all of the costs that were associated with obtaining their patents. A patent legally prohibits others from producing a product and allows the holder to sell the rights to produce the underlying goods to other businesses (Cromwell, 2015). It makes sense to expense patent costs as incurred since there can be no guarantee of any specific patent application being granted, nor of any commercial value being achievable from the granting of a specific patent (Westbrook, 2013). The owners of the company are unsure if any or all of their patent costs can be capitalized and if any impairment testing should be done periodically on their patents.
This literature review considers whether or not a company should capitalize patent costs and whether or not impairment testing should be done periodically on patents by responding to the following questions:
1. What are patent costs?
2. What kind of patent costs can be capitalized and what kind of patent costs can be expensed?
3. What is impairment?
4. Is impairment testing required on patents? If so, how often?
What are patent costs? If a company files for a patent application, this cost will include the registration, documentation, and other legal fees associated with the application (Bragg, 2012). If the company instead bought a patent from