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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
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
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
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
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
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
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
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.
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;
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.
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
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
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;
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.
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.