{"id":261,"date":"2024-09-06T16:48:03","date_gmt":"2024-09-06T16:48:03","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/chapter\/introduction-to-intangible-assets\/"},"modified":"2024-09-06T16:48:03","modified_gmt":"2024-09-06T16:48:03","slug":"introduction-to-intangible-assets","status":"publish","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/chapter\/introduction-to-intangible-assets\/","title":{"raw":"Introduction to Intangible Assets","rendered":"Introduction to Intangible Assets"},"content":{"raw":"\n<h2>What you will learn to do: Account for intangibles<\/h2>\nLet\u2019s take another quick look at Albemarle\u2019s assets from the annual report (SEC Form 10-K):\n\nAfter investments and other assets (covered in the next section), the company lists goodwill and then other intangibles, net of amortization.\n\n<img class=\"alignright wp-image-4749 \" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/30212619\/copyright-5267127_1920-1024x1024.png\" alt=\"A copyright symbol.\" width=\"400\" height=\"400\">In addition to goodwill, which is often a large number, intangible assets include:\n<ul>\n \t<li style=\"font-weight: 400;\">Patents<\/li>\n \t<li style=\"font-weight: 400;\">Copyright<\/li>\n \t<li style=\"font-weight: 400;\">Franchise agreements<\/li>\n \t<li style=\"font-weight: 400;\">Trademarks<\/li>\n<\/ul>\nIntangible assets have either an identifiable or indefinite useful life. For instance, a patent will have a limited and somewhat predictable useful life, because the rights granted by a patent may only protect the holder of the patent for 14-20 years, and the actual usefulness of the patent may even be shorter than that as new products replace old ones. However, something like goodwill that is purchased when a company buys another company has an undefined useful life.\n\nIntangible assets are typically expensed according to their respective life expectancy. This is similar to fixed assets, except the allocation of the cost is called amortization instead of depreciation, and it is usually calculated using the straight-line method. Those with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever one is shorter.\n\nIntangible assets with indefinite useful lives, like trademarks and goodwill, can\u2019t be amortized, but they are reassessed each year for impairment (loss of value). If an impairment has occurred, then a loss must be recognized. An impairment loss is determined by subtracting the asset\u2019s fair value from the asset\u2019s book or carrying value.\n","rendered":"<h2>What you will learn to do: Account for intangibles<\/h2>\n<p>Let\u2019s take another quick look at Albemarle\u2019s assets from the annual report (SEC Form 10-K):<\/p>\n<p>After investments and other assets (covered in the next section), the company lists goodwill and then other intangibles, net of amortization.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-4749\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/30212619\/copyright-5267127_1920-1024x1024.png\" alt=\"A copyright symbol.\" width=\"400\" height=\"400\" \/>In addition to goodwill, which is often a large number, intangible assets include:<\/p>\n<ul>\n<li style=\"font-weight: 400;\">Patents<\/li>\n<li style=\"font-weight: 400;\">Copyright<\/li>\n<li style=\"font-weight: 400;\">Franchise agreements<\/li>\n<li style=\"font-weight: 400;\">Trademarks<\/li>\n<\/ul>\n<p>Intangible assets have either an identifiable or indefinite useful life. For instance, a patent will have a limited and somewhat predictable useful life, because the rights granted by a patent may only protect the holder of the patent for 14-20 years, and the actual usefulness of the patent may even be shorter than that as new products replace old ones. However, something like goodwill that is purchased when a company buys another company has an undefined useful life.<\/p>\n<p>Intangible assets are typically expensed according to their respective life expectancy. This is similar to fixed assets, except the allocation of the cost is called amortization instead of depreciation, and it is usually calculated using the straight-line method. Those with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever one is shorter.<\/p>\n<p>Intangible assets with indefinite useful lives, like trademarks and goodwill, can\u2019t be amortized, but they are reassessed each year for impairment (loss of value). If an impairment has occurred, then a loss must be recognized. An impairment loss is determined by subtracting the asset\u2019s fair value from the asset\u2019s book or carrying value.<\/p>\n","protected":false},"author":6,"menu_order":7,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Introduction to Intangible Assets\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Accounting Principles: A Business Perspective\",\"author\":\"James Don Edwards, University of Georgia & Roger H. 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