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Titlech12
TagsGoodwill (Accounting) Intangible Asset Book Value Amortization (Business) Valuation (Finance)
File Size239.3 KB
Total Pages50
Table of Contents
                            Answer	No.	Description
Answer	No.	Description
Answer	No.	Description
Answer	No.	Description
Answer	No.	Description
Item	Description
Item	Description
	Item
	Type
	Item
	Type
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	Learning Objective 1
	Learning Objective 2
	Learning Objective 3
	Learning Objective 4
	Learning Objective 5
	Learning Objective 6
	Learning Objective 7
	Learning Objective 8
	Learning Objective 9
	Learning Objective 10
	Learning Objective *11
No.	Answer	Derivation
No.	Answer	Derivation
No.	Answer	Derivation
	Ex. 12-121
	Ex. 12-122
	Ex. 12-123
	Solution 12-123
	Ex. 12-124—Short essay questions.
	Solution 12-124
	Ex. 12-125
	Solution 12-125
	Ex. 12-126
	Solution 12-126
	Ex. 12-127—Intangible assets questions.
	Solution 12-127
	Ex. 12-128
	Solution 12-128
	Ex. 12-129
	Solution 12-129
	Ex. 12-130
	Solution 12-130
	Ex. 12-131—Intangible assets theory.
	Solution 12-131
	Ex. 12-132
	Solution 12-132
	Ex. 12-133
	Solution 12-133
	Ex. 12-134—Carrying value of patent.
	Solution 12-134
	Ex. 12-135—Accounting for patent.
	Solution 12-135
	Ex. 12-136
	Solution 12-136
	Ex. 12-137
	Solution 12-137
	Ex. 12-138
	Solution 12-138
	Ex. 12-139—Impairment of copyrights.
	Solution 12-139
	Ex. 12-140
	Solution 12-140
	Ex. 12-141
	Solution 12-141
	Ex. 12-142—Acquisition of tangible and intangible assets.
	Solution 12-142
	*Ex. 12-143
	Solution 12-143
	Pr. 12-144—Intangible assets.
	Pr. 12-144  (Cont.)
	Solution 12-144
	Solution 12-144  (Cont.)
	Pr. 12-145—Goodwill, impairment.
	Solution 12-145
	Solution 12-145  (Cont.)
                        
Document Text Contents
Page 50

Test Bank for Intermediate Accounting, Fourteenth Edition

Short Answer

1. Briefly describe some of the similarities and differences between U.S. GAAP and IFRS with
respect to the accounting for intangible assets.

1. Similarities include (1) in U.S. GAAP and IFRS, the costs associated with research and
development are segregated into the two components; (2) IFRS and U.S. GAAP are similar
for intangibles acquired in a business combination. That is, an intangible asset is recognized
separately from goodwill if it represents contractual or legal rights or is capable of being
separated or divided and sold, transferred, licensed, rented, or exchanged; (3) Under both
GAAPs, limited life intangibles are subject to amortization, but goodwill indefinite life
intangibles are not amortized; rather they are assessed for impairment on an annual basis; (4)
IFRS and U.S. GAAP are similar in the accounting for impairments of assets held for disposal.

Notable differences are: (1) while costs in the research phase are always expensed under
both IFRS and U.S. GAAP, under IFRS costs in the development phase are capitalized once
technological feasibility is achieved; (2) IFRS permits some capitalization of internally
generated intangible assets (e.g. brand value), if it is probable there will be a future benefit
and the amount can be reliably measured. U.S. GAAP requires expensing of all costs
associated with internally generated intangibles; (3) IFRS requires an impairment test at each
reporting date for long-lived assets and intangibles and records an impairment if the asset’s
carrying amount exceeds its recoverable amount; the recoverable amount is the higher of the
asset’s fair value less costs to sell and its value in use. Value in use is the future cash flows to
be derived from the particular asset, discounted to present value. Under U.S. GAAP,
impairment loss is measured as the excess of the carrying amount over the asset’s fair value;
(4) IFRS allows reversal of impairment losses when there has been a change in economic
conditions or in the expected use of the asset. Under U.S. GAAP, impairment losses cannot
be reversed for assets to be held and used; the impairment loss results in a new cost basis
for the asset; (5) under IFRS, acquired in-process research and development (IPR&D) is
recognized as a separate intangible asset if it meets the definition of an intangible asset and
its fair value can be measured reliably. U.S. requires acquired IPR&D to be written off.

2. Briefly discuss the convergence efforts that are underway in the area of intangible assets.

2. The IASB and FASB have identified a project relating to the accounting for research and
development that could possibly converge IFRS and U.S. GAAP on the issue of in-process
R&D. One possibility is to amend U.S. GAAP to allow capitalization of in-process R&D similar
to the provisions in IFRS. A second project, in a very preliminary stage, would consider
expanded recognition of internally generated intangible assets. As indicated, IFRS permits
more recognition of intangibles compared to U.S. GAAP. Thus, it will be challenging to
develop converged standards for intangible assets, given the long-standing prohibition on
capitalizing intangible assets and research and development in U.S. GAAP.

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