Accounting GAAP and IFRS

Accounting
Tutor: None Selected Time limit: 1 Day

Which intangible assets appear on a company's balance sheet under US GAAP ?accepted accounting principles? Describe how US GAAP determines whether an intangible asset is included in the balance sheet.

May 11th, 2015

a) Which intangible assets appear on a company's balance sheet under US GAAP ?accepted accounting principles?

According to guidelines set forth in generally accepted accounting principles (GAAP), intangible assets are only listed on a company's balance sheet if they are acquired assets and assets with an identifiable value and useful lifespan that can thus be amortized.

Internally developed intangible assets do not appear as such on a company's balance sheet. Even though an intangible asset such as Coca-Cola's logo carries huge name recognition value, it does not appear on the company's balance sheet because the logo was developed internally and does not have a price that can be used to assign fair market value, as would be the case had the logo been part of the acquisition of another firm.

b) Describe how US GAAP determines whether an intangible asset is included in the balance sheet.

U.S GAAP provides structure for the reporting process by placing all intangibles into six major categories:

  1. Artistic-related (such as copyrights)
  2. Technology-related (patents)
  3. Marketing-related (trademarks)
  4. Customer-related (a database of customer information)
  5. Contract-related (franchises)
  6. Goodwill

In all of these categories (except for goodwill, which will be explained later in this chapter), the intangible asset is actually an established right of usage. As an example, according to the Web site for the United States Copyright Office, a copyright provides its owner with the right to use “literary, dramatic, musical, artistic, and certain other intellectual works.” Similarly, the United States Patent and Trademark Office Web site explains that “a patent for an invention is the grant of a property right to the inventor.” Thus, most intangible assets represent a legal right that helps the owner to generate revenues.

May 11th, 2015

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May 11th, 2015
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May 11th, 2015
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