Class Notes (1,100,000)
CA (650,000)
UTSC (30,000)
MGA (300)
MGAB01H3 (100)

Intangible Capital Assets

Financial Accounting
Course Code
Liang Chen

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Intangible Capital Assets
¾ These include rights, privileges, and competitive advantages that result from the
ownership of these long-lived assets. Intangible assets are recorded at cost, and this
cost is amortized over the useful life of the intangible asset in a rational and
systematic manner. Instead of crediting an accumulated amortization account, the
intangible asset account is credited directly. These assets are usually amortized on a
straight-line basis. If there is a permanent impairment in value, the difference must be
recorded as an impairment loss. If the market value increases, the net book value is
not adjusted. When the asset has no legally determined life, it is not amortized
¾ It is an exclusive right issued by the Canadian Intellectual Property Office of Industry
Canada for a period of 20 years from the date of the application. A patent is non-
renewable. The initial cost of a patent is the price paid to acquire it. The cost of a
patent should be amortized over its 20-year legal life or its useful life, whichever is
shorter. The entry to record amortization would be DR Amortization Expense, CR
¾ Gives the owner an exclusive right to reproduce and sell an artistic or published work.
Copyrights extend for 50 years. The cost include the cost of acquiring and defending
Trademarks and Trade Names
¾ Is a word, phrase, jingle, or symbol that identifies a particular enterprise or product. A
trademark can only be registered for 15 years and can be renewed after. As long as
the trademark or trade name is marketable, it has an indefinite useful life; thus not
amortizable. If it is purchased, the cost is the purchase price
Franchises and Licences
¾ A contractual arrangement between the franchisor and franchisee. It gives the
franchisee permission to sell certain products, offer specific services, or use certain
trademarks or trade names. A contract between a government body and a company is
called a licence. When costs can be identified with the acquisition of the franchise or
licence, an intangible asset should be recognized
¾ Annual payments paid to the franchise are called royalties and are recorded as
operating expenses
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