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15 Cards in this Set
- Front
- Back
Intangible Assets (normally classified as long term)
There are two main characteristics of intangibles: 1. __________ 2. __________ There are 6 main categories of Intangibles: 1. ___________ examples? 2. ___________ examples? 3. ___________ examples? how long granted? 4. ___________ examples? 5. ___________ examples? 6. ___________ |
1. Lack physical substance
2. Not financial instruments. 1. Marketing-Related - ie. Trademarks, domain names 2. Customer-Related - ie. Customer lists, order backlogs 3. Artistic-Related - ie. plays, musical works, etc. 70 years. 4. Contract-Related - ie. construction permits, contracts 5. Technology-Related - ie. Patents (20 years) 6. Goodwill |
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Initial Recognition of Intangibles
Purchased Intangibles: __________. If acquiring a group of assets, allocated based on ___________. Internally Created Intangibles: __________. Only _________ costs incurred in development (ie. _______) Because R&D is difficult to allocate costs, it is _______ when _______, even though it ___________ (_____ or _____). R&D generally has its own line on I/S. Calc. amount of R&D exp: 1. Equip having uses in R&D for 5 yrs ($200) 2. Indirect costs allocated to R&D ($100) 3. Materials purchased for future R&D ($100). |
Record at cost; relative fair value; Generally expensed; capitalize direct; legal costs for patent; expensed; incurred; frequently results in intangibles; patents or copyrights;
1. 40 2. 100 3. 0 |
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Software Development Costs
Costs incurred internally are _______ to ____ until _________ is established (when all _____ and _____ has been completed). Afterwards, all costs are _______. Goodwill is recorded as the ___________ over the _________ of the identifiable ______ acquired (including ____________). Upon the amalgamation, all goodwill must be assigned to 1 or more ________, that expect to ____________. Ex: Cost of Assets = 145, FV of Assets = 265, A/P = 25, purchase price = 300, Goodwill = ?. J/E for Purchase? If there is no excess of purchase price - net assets, then a GAIN is recorded |
expensed; R&D; technological feasibility; coding; testing; capitalized;
excess of purchase price; fair market value; net assets; internally created intangibles; reporting units; benefit from the synergy; Ex: 300 - (265-25) = 60 Goodwill. Assets 265 Goodwill 60 , A/P 25 , Cash 300 |
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Amortization
Finite-lived - amortize based on useful life. Residual Value is assumed to 0 unless: 1. The asset _______________ for _______. 2. There is a ____________ OR the residual value _____________. Amount of Amort. Exp. should reflect ______ in which _________. The intangible's ________ should be ______ at the end of each ________. Capitalized Software: Should be _______ on a _________. Use the _______ or the _______ method, whichever is _______ in a given year. Indefinite-lived assets and goodwill are _______. |
is expected to have a continuing useful life for another entity; committment from a 3rd party to buy (at end of life); can be determined by market prices;
pattern; co. uses the asset; useful life; reviewed; reporting period; amortized; product-by-product basis; Straight line; percent of revenue; greater. not amortized |
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Impairment Tests
_________ are subject to review for potential impairment. For intangible assets _______, test for impairment ______________. Apply the _________ before recording impairment. For intangible assets ________, test for impairment _________. (or _________). There is no ______ test except for _______. 1. _________ test - CV compared to UDCF. 2. _________ test - CV compared to DCF Capitalized Software Costs, compare _________ costs to ________ and any excess should be written off. Tested ______. |
All intangible assets; being amortized; when circumstances warrant testing; recoverability test;
not being amortized; annually; more often if circumstances warrant this; recoverability; goodwill. Recoverability; Impairment; unamortized; NRV; quarterly |
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Goodwill Impairment:
must be tested ______ and be _______ year to year (can be tested more frequently is circumstances warrant this). 2 steps: 1. Compare fair value of reporting unit with its carrying amount (including GW - its net assets) 2. If FV < CV, an impairment loss is estimated as the excess of CV of the GW over its implied value (excess of fair value of entire unit to fair value without GW) EX: Cash=50 A/R=200 N/P= 100 Goodwill = 200 Mngt expects future CFs of $400. There is an offer to purchase for $335. What is impairment? |
annually; consistent;
FV- CV(w/out GW) = Implied GW Implied GW - CV of GW = Impairment. 335-150= 185 - 200 = (15) IMPAIRMENT |
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De-recognition
Sales of most intangibles are like sales of ________. CV Patent = 3600. Cash rec. = 5000. J/E? When unit is disposed of GW remains in ___ of unit (calc. of G/L). When a portion of a unit is sold, a portion of the GW based on ______ is removed. |
Long term assets
Cash 5000 , Gain on Sale 1400 , Patent 3600 CV; FV |
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IFRS differences - Intangibles:
1. Development costs _________ once ___________ (US: __________) 2. ________________ (except for goodwill) 3. __________________. |
1. are capitalized; technological feasibility is achieved; only software costs
2. Impairment loss reversals are recorded. 3. Revaluation of intangibles in active markets allowed. |
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Bonds (also know as _____)
The purpose of bonds is to borrow when the amount of ________ is ____________. Bond sold in between interest dates: Buyer will ___________, and then _____________. |
indenture; capital needed is too large for one borrower;
pay seller accrued interest; receive full interest payment; |
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Held to maturity: method known as ___________. Measured this way only if company has _____ and _____ to ____________. Not carried at FV, but ________.
Ex: 1. Record Bond at FV. 2. Prepare amort. schedule: a. ______ b. ______ (______) c. ______ (______) d. _______ (______) e. _______ (______) You can sell HTM with a few months left, but if you sell HTM with > 1 yr. left, then ________________. It is optional to have a adjunct premium / contra discount account or to amortize directly. DO problems. Bond Issue Costs: Costs associate with issuing bonds are _______ then ______ over the life of the bonds. Typically ________. |
amortized cost; intent; ability; hold securities to maturity; initially recognized at FV.
a. date b. Cash Payment (Face V. x Inter. Payment) c. Interest Rev (CV x Mark. rate) d. Discount/Premium (b-c or c-b) e. Carrying Value (old e-d or old e+d) the FASB can ban use of HTM. capitalized; amortized; S-L method. |
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Trading securities, Avaliable for Sale and EQUITY <20 % of ownership: ________ method:
Trading Sec (equity/debt): 1. Initially record at FV 2. Debt, ______ like usual, but report _______ in ___. 3. Equity, ___________ and report _______ in ___. Use seperate ______ account to account for Unrealized G/L Ex: 12/31/05 Investment = 322,744. (22,744 prem. 300,000 FV, 12% bond interest) 2005 Premium amortiz. = 3726. 12/31/06 FV of Inv. = 320500. J/E on 12/31/06 (2 sets?) |
FAIR VALUE
2. amortize; unrealized G/L in NI 3. recognize Dividend Income, unrealized G/L in NI. FV adjustment account Cash 36,000 , Premium Amortized 3726 , Interest Revenue 32274 New CV = 319018 Invest. in Trading Sec. 1482 , Unrealized Gain 1482 |
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Avaliable for Sale Invesments:
SAME AS Trading Securities, but ____________________. Ex: FV of investment = 4900 Amortized Cost = 5200 Sold soon after for = 5300 J/E - Trading Security? J/E - Avaliable for Sale Security? |
Unrealized G/L reported as equity (Other Comprehensive Income)
Ex1: TS Cash 5300 FV adj - TS 300 ,Gain on sale of invesment 400 ,Investment - TS 5200 Ex2 - AFS Cash 5300 , Gain on sale 100 , Investment in AFS 5200 Investment in AFS - FV adj 300 , Unrealized G/L - Equity 300 |
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The ________ is used for equity investments lacking significant influence and no readily determinable ____. The investment is recorded at ____ and carried until ____ or ______. If ________ exceed _________ of investment, __________. OTHERWISE DO NOT REPORT EARNINGS / DIVIDENDS AS INVESTMENT
________ is used to account for investments if the investor has the ability to __________ over the policies of investee. An investment of ____ is presumed to be enough (but not set in stone - ie. Coke buying 10% of bottling company). Record the investment at cost and adjust for the - ______________(if the earnings are positive, ______) - ______________ (if dividends are received, _______) Exception: If share of investee's losses makes carrying amount < 0 ________ using ________, if profitable _______, remember the losses from _______. Ex: 07 CV = 3 07 Earning = -8 CV = 0 08 Earnings = 6 CV = 1 (-5+6) |
Cost method; FV; cost; sold; written down; cumulative dividends; cumulative earnings; write down original cost
Equity method; exercise significant influence; 20%; investor's share of earnings; write up investment; Dividends received; write-down; discontinue; equity method; next year; prior year; |
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Impairments of Debt / Equity securities are losses that are determined to be ___________. Should be tested __________ at the ________. Recalculation of amortization if necessary (impairments not likely for Fair Value method securities).
Transfers! from Trading to AFS: _________ from AFS to Trading: _________ from Equity to Cost/FV: _________ from Cost/FV to Equity: _________ |
other than temporary; each reporting period; individual security level;
- Unr. G/L at date of transfer shouldn't be reversed! - Unr. G/L at date of transfer should be reflected in earnings - Equity method suspended and investment account not retroactively adjusted -Results of ops for current and prior periods and RE needs to be restated. |
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IFRS Differences - Investments:
1._________________________ 2.______________________ AFS & _______ 3._________________________ |
1. Impairments of secruities impaired regardless of whether it is "other that temporary
2. Impairment reversals allowed for AFS and Amort. Cost debt. 3. Reclassification to/from "Trading" category prohibited. |