accounting presentation(updated)
TRANSCRIPT
![Page 1: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/1.jpg)
ACCOUNTING PRESENTATION
Nader Nehal (B1405011) Kousar Sharmin Jany (B1405020) Faiaz Sababa Saeed (B1405023) Syeda Afrida Haque (B1405038)
Fazlee Wahid Omi (B14050113) Sk. Mamunur Rashid Sady (B1405144)
Group-3
![Page 2: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/2.jpg)
PRESENTATION ON
![Page 3: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/3.jpg)
What basically intangible asset is?
![Page 4: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/4.jpg)
LET’S DEFINE
![Page 5: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/5.jpg)
An asset that is not physical in nature.
'Intangible Asset 'is
![Page 6: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/6.jpg)
INTANGIBLE ASSTES
FOR EXAMPLE
![Page 7: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/7.jpg)
![Page 8: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/8.jpg)
INTANGIBLE ASSETS REPRESENTS
“POTENTIAL REVENUE”
![Page 9: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/9.jpg)
LEAKY COULDRON AND PAPER PLANE CO.*INFINITE*
![Page 10: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/10.jpg)
INTANGIBLE ASSTEST CAN BE
“INTELLECTUAL PROPERTY”
![Page 11: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/11.jpg)
![Page 12: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/12.jpg)
LETS DISCUSS ELBORATELY
![Page 13: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/13.jpg)
Two Main Characteristics:
Characteristics
(1) Lack of physical existence.(2) They are not financial instruments.
Normally classified as long-term asset.
Common types of intangibles:PatentsCopyrightsFranchises or licenses
Trademarks or trade namesGoodwill
INTANGIBLE ASSETS ISSUES
![Page 14: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/14.jpg)
Purchased Intangibles:Recorded at cost.If purchased in exchange of stock, the fair value of the consideration given or received which is evident, should be recognized.Includes all costs necessary to make the intangible asset ready for its intended use.
VALUATION
INTANGIBLE ASSETS ISSUES
![Page 15: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/15.jpg)
Internally Created Intangibles:Expense as incurredOnly capitalize direct costs incurred in developing the intangible, such as legal costs.
INTANGIBLE ASSETS ISSUES
![Page 16: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/16.jpg)
Determine The Useful Life•Expected Use•Useful Life of relative assets•Legal Regulatory Conceptual Framework •Limiting useful life•Law supporting renewal or extension•Effect of obsolesce, demand, competition.Level of Maintenance cost
INTANGIBLE ASSETS ISSUES
![Page 17: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/17.jpg)
Limited-Life Intangibles:• Amortize to (Cost Less Residual Value)• Assume zero Residual value unless it has value to
another company after its useful life• Reflect the pattern in which the company consumes
the asset (if Determined)• Credit asset account or accumulated amortization.
AMORTIZATION OF INTANGIBLES
![Page 18: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/18.jpg)
Indefinite-Life Intangibles:• No foreseeable limit on time the
asset is expected to provide cash flows.
• No amortization.
AMORTIZATION OF INTANGIBLES
![Page 19: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/19.jpg)
Six Major Categories:
1) Marketing-related.2) Customer-related.3) Artistic-related.4) Contract-related.5) Technology-related.6) Goodwill.
TYPES OF INTAGIBLES
![Page 20: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/20.jpg)
Marketing-Related Intangible Assets• Examples are:
Trademarks or trade names, newspaper mastheads, Internet domain names, and noncompetition agreements.
• Trademark or trade name has legal protection for indefinite number of 10 year renewal periods.
• Capitalize acquisition costs. • No amortization.
TYPES OF INTAGIBLES
![Page 21: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/21.jpg)
Contract-Related Intangible Assets• Examples are:
franchise and licensing agreements, construction permits, broadcast rights, and service or supply contracts.
• Franchise (or license) with a limited life should be amortized to expense over the life of the franchise.
• Franchise with an indefinite life should be carried at cost and not amortized.
TYPES OF INTAGIBLES
![Page 22: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/22.jpg)
Goodwill• Created by good relationships by building up a reputation.• A going concern valuation.• Measured at the time of business to be sold.• The excess or residual amount of the cost over the fair
value of the identifiable net assets purchased.• The most intangible of the intangible assets.• Can not be amortized; can only be impaired.• Internally created goodwill should not be capitalized.
TYPES OF INTAGIBLES
![Page 23: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/23.jpg)
Recording:Purchased goodwill: Goodwill is recorded only when an entire business is purchased. The difference between fair value of identifiable net assets and purchased price is considered as goodwill.For example: ABC Ltd. purchased the net assets of XYZ company for $500,000 on 31 December 2012.
TYPES OF INTAGIBLES
![Page 24: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/24.jpg)
Goodwill Write-off• Goodwill is considered to have an indefinite life• Should not be amortized• Only adjust carrying amount when goodwill is impaired.Bargain Purchase- Negative goodwill• Purchase price less than the fair value of the identifiable
net assets acquired.• Also referred as Negative goodwill.• Results from a market imperfection.• The excess amount is recorded as a gain by the purchaser.
TYPES OF INTANGIBLE ASSETS
![Page 25: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/25.jpg)
Impairment of Limited-Life IntangiblesSame as impairment for long-lived assets in Chapter 11.1. If the sum of the expected future net cash inflows is less
than the carrying amount of the asset, an impairment has occurred (recoverability test).
2. The impairment loss is the amount by which the carrying amount of the asset exceeds the fair value of the asset (fair value test).The loss is reported as part of income from continuing operations, “Other expenses and losses” section.
IMPAIREMENT OF INTANGIBLE ASSETS
![Page 26: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/26.jpg)
Recoverability test: If the sum of the expected future net cash flows is less than the carrying amount of the asset, an impairment has occurred.Expected Future Cash Flow $ 50000Carrying Amount $ 80000Difference $ (30000)
Asset is Impaired
IMPAIREMENT OF INTANGIBLE ASSETS
![Page 27: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/27.jpg)
Impairment of Indefinite-Life Intangibles Other than Goodwill• Should be tested for impairment at least
annually.• Impairment test is a fair value test.
• If the fair value of asset is less than the carrying amount, an impairment loss is recognized for the difference.
• Recoverability test is not used.
IMPAIREMENT OF INTANGIBLE ASSETS
![Page 28: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/28.jpg)
LASTLY
![Page 29: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/29.jpg)
Frequently results in something that a company patents or copyrights such as:
new product, process, idea,
formula, composition, orliterary work.
Because of difficulties related to identifying costs with particular activities and determining the future benefits, all R & D costs are expensed when incurred.
RESEARCH AND DEVELOPMENT COST
![Page 30: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/30.jpg)
THANK YOU
![Page 31: Accounting presentation(updated)](https://reader036.vdocument.in/reader036/viewer/2022062412/58f05fa81a28abc66d8b458f/html5/thumbnails/31.jpg)
QUESTIONS?