Intangible Assets

Question 1

Costs to maintain goodwill

Answer 1

They are expensed; not added to the goodwill value

Question 2

What level do you test goodwill at

Answer 2

At the operating level(reporting unit) or one level below that

Question 3

Qualitative factors for testing impairment

Answer 3

• Economic conditions: deterioration of economy
• Industry & Market conditions: decline in industry & increase in costs associated with it
• Firm specific conditions: decline in cash flow, change in management, loss of important people, bankruptcy, etc.

Question 4

Impairment Loss J/E

Answer 4

Dr. Impairment Loss

Cr. Goodwill

Question 5

R&D costs for current projects vs current & future projects

Answer 5

Current projects are expensed to R&D while current & future projects are depreciated over their estimated future lives and the depreciation goes to R&D over time

Question 6

R&D research performed by other companies for you

Answer 6

When a company performs R&D for you, you expense it and the shit you do for other people don’t count

Question 7

How are software costs for internal use depreciated

Answer 7

Straight line method

Question 8

How software costs to be sold are depreciated

Answer 8

• Revenue Method: Current year software costs multiplied by {Current year revenue divided by (Current year revenue + Estimated future revenue)} - really just use the percentage of revenue
• or straight line; which ever is greater