ACC408 W2-DF1.edited

School: Ashford University - Course: ACC 408 - Subject: Accounting

Hello classmates and Dr. K, What are the three major types of intangible assets, and how does the accounting for them differ? The three primary intangible assets are purchased intangibles, intangibles acquired in a business combination, and internally generated intangibles. Purchased intangible assets calculate at cost, and the useful life of the assets is either determined to be finite or indefinite. Intangible assets with finite determinations configure amortization using a systematic basis over the useful life of the assets (Doupnik et al., 2020). The residual value is assumed to be zero unless there is an agreement to purchase them by a third party at the end of their life or if there is an active market from which there is an estimated residual value of the assets (Doupnik et al., 2020). Intangibles acquired in a business combination recognize assets apart from goodwill at fair value under IAS 38 and U.S. GAAP. Intangibles acquired in a business combination include patents, trademarks, internet domains, customer lists, and brands. Internally generated intangibles are closely associated with the Research & Development (R&D) process by applying knowledge to creating commercially viable products and services. Research expenditures require expenditures expensed as incurred. Development expenditures should also expense transactions as soon as possible "when there is likely to be substantial uncertainty about its technical feasibility or commercial success (Doupnik et al., 2020, p.122.)". How are internally generated intangibles handled under IFRS? How does this differ from U.S. GAAP? U.S. GAAP requires expensing research and development expenditures when incurred, with some exceptions, like some computer software. Under IFRS, internally generated intangibles have the following six criteria to meet. If they aren't, then expensing is required (Doupnik et al., 2020, p.123): 1. "The technical feasibility of completing the intangible asset so that it will be available for use or sale." 2. "The intention to complete the intangible asset and use or sell it." 3. "The ability to use or sell the intangible asset." 4. "How the intangible asset will generate probable future economic benefits. Among other things, the enterprise should demonstrate the existence of a market for the output of the intangible asset or, if it is to be used internally, the usefulness of the intangible asset." 5. "The availability of adequate technical, financial, and other resources to complete the development and to use or sell the intangible asset." 6. "The ability to reliably measure the expenditure attributable to the intangible asset during its development." Which intangible assets are subject to annual impairment testing?

Intangible assets with indefinite lives and goodwill are reviewed annually at minimum for impairment, whether or not indicators exist (Doupnik et al., 2020).