INTANGIBLE ASSETS

-kaya mong maituro, can be distinguished, non-cash no contractual right to received cash, w/out
physical substance

ESSENTIAL CRITERIA

-Identifiable- u can separate, pinpoint, can be sold, licensed

-control- u can only have the benefits, prevent others from benefit

-future economic benefit-

Identifiable Intangible Asset

Unidentifiable Intangible Asset

MEASUREMENT

A.) Initially Cost-

B.) Subsequently – cost model, revaluation model

CLASSIFICATION

-Definite life- legal right is ended, competitive advantage ended, you have to amortized and tested for
impairment

-Indefinite Life- walang kataposan, not amortized but tested for impairment

AMORTIZATION- kani ang pag bawas sa cost, not the cost but the amortizable amount, when there is a
change in accounting estimate, the change should be currently and prospectively. If there is change the
you have to identify the remaining cost and divide with the remaining life then it is the new amortization
expense.

-intangible asset shall be amortized on a systematic bases over the useful life

AMORTIZATION METHOD-pattern in which future economic benefit from the asset expected to be
consumed by entity, if no pattern determine, straight line method can be used

INITIAL MEASUREMENT-we measure intangible asset, initially at cost

a.) Separate acquisition- cash payment plus directly attributable

b.) Acquisition as part of business combination- fair market value of intangible asset
c.) Acquisition by way of govt grant- fair value market, zero or nominal value (if naa ka nabayran)
plus directly attributable cost
d.) Acquisition by exchange- commercial substance (fair market value asset given up or carrying
amount asset given up) lacks commercial carrying amount assent given up, plus cash payment if
there is any , deduct if you received cash
e.) Internally generated- add all the directly attributable cost

SUBSEQUENT EXPENDITURE- treated as expenses, capitalized if it can enhance the intangible asset
COST MODEL- intangible asset carried at cost less any accumulated amortization and any accumulated
impairment loss

REVALUATION MODEL- intangible asset shall be carried at revalued amount less any subsequent
amortization and any subsequent accumulated impairment loss

DEROCOGNITION- on disposal, no economic benefit, when there is derecognition there will be gain or
loss

GOODWILL- revised rule of goodwill is that goodwill will only be recognized if it is purchased goodwill
through business combination

-there is excess of earnings in the normal earnings by reason of good name, capable staff, high credit
standing

MEASUREMENT OF GOODWILL-

RESIDUAL APPROACH- Acquisition Price less fair market value of net asset equals goodwill (net assets=
assets-liabilities)

Excess of the purchase price over the fair value of net tangible and identifiable asset equals to goodwill

DIRECT APPROACH- basis of future earning, if the future earnings exceed normal earnings, the excess is
the goodwill

a.) Purchase of “average excess earnings”- totoong kinita goodwill is measured at average earnings

Average earnings less normal earnings equals average excess earnings then multiply years of excess
earnings equals goodwill

b.) Capitalization of “average excess earnings” capitalization is depend on entities

Average excess earning divided by capitalization rate equals goodwill

c.) Capitalization of “average earnings”

Average earnings divided by capitalization rate equals net asset including goodwill less net excluding
good will equals good will

d.) Present value method

Average earnings less normal earnings equals average excess earnings multiply by years of earnings
at present value

IMPAIRMENT OF GOODWILL

-not amortized because it has indefinite life, tested for impairment annually, bumababa ang exceed
earnings

NEGATIVE GOODWILL/GAIN ON

-acquisition price is lower than fair value of net asset (mas barato nimo napalit)

- acquisition prices less fmv of net assets equal gain on bargain purchase which is negative
 -from negative goodwill to gain on bargain purchase

-constructive liability para mu taas ang sale to maintain good quality business

PATENT- exclusive right granted by the government to an inventor, to control manufacture, sale or
other use of invention for a specified period of time. Has legal life (R.A No. 8293) 20 years, patent
cant be renewed unless there is a change of the patent you register like improvements or enhances

UNDER US GAAP- TECHNOLOGY BASED

MEASUREMENT OF PATENT

BY PURCHASE (add the following, if ikaw ning palit sa patent) (be capitalized)

a.) Purchase price

b.) Import duties
c.) Non refundable taxes
d.) Any directly attributable cost

INTERNALLY GENERATED (ang entity mismo ang nabuhat patent) (be capitalized)

a.) Licensing and other related legal fees in securing patent rights
b.) Development cost -technological feasibility up to before commercial production

AMORTIZATION OF PATENT

PURCHASED- remaining legal life or useful life whichever is shorter (how many years mapanginabangan)

INTERNALLY DEVELOPED-legal life or useful whichever is shorter

RELATED PATENT-extended life (enhances the old patent) in which the unamortized cost of the old
patent shall be amortized over extended life

COMPTETING PATENT-amortized remaining life of old patent (same ra kayog patent ,paliton kay para
mawad.an kag kontra)

Patent has finite useful life, cost is amortized

IMPAIRMENT OF PATENT

Whenever there is an indication of impairment

COST OF LITIGATION (gikasohan)

SUCESSFUL & UNCESSSFUL – all cost are expenses , because it doesn’t enhance or longing the life but it
only maintains the patent
TRADEMARK- symbol, slogan, name used to distinguish from other product.

UNDER US GAAP- MARKET RELATED

MEASUREMENT OF TRADEMARK

INTERNALLY DEVELOPED -capitalized the filling fees. Registry fess and design cost

PURCHASED- capitalized purchase price, directly attributable cost

Debit- trademark credit-whatever u let go for sample cash

AMORTIZATION OF TRADEMARK

IT IS NOT AMORTIZED BECAUSE IT CAN BE RENEWED EVERY 10 YEARS BUT RATHER SUBJECT FOR
IMPAIRMENT

LEGAL LIFE OF TRADEMARK- Legal life- 10years and may be renewed for periods of 10years (R.A No.
8293)

IMPAIRMENT-whenever there is an indication that the trademark maybe impaired

Debit impairment loss credit trademark

LITIGATION- succesful and uncessful- all cost are treated as outright expense, reason is to maintain the
trademark rather than enhance or increase the economic benefit

(debit expense credit cash, if uncessful debit right off credit trademark)

COPYRIGHT- exclussive right granted by the government to an author, composer, enabling the grantee
to publish, sell, benefit from the literary, musical/ artistic work.

UNDER US GAAP- ARTISTIC RELATED

MEASUREMENT OF COPYRIGHT

INTERNALLY DEVELOPED- licensing fee, all expenses incurred in the production of the work including to
obtain the right

PURCHASED-purchased price, directly attributable cost

AMORTIZATION OF COPYRIGHT

It has definite life, because kay mapol.an ang mga tao, outdated

1.) Useful life- is that period in which benefits, sale and royalties are expected
2.) Write off against the revenue of 1st printing (offset the cost with the revenue of 1 st printing)

PROTECTION FOR COPYRIGHT

Lifetime of the author plus 50years after death

FRANCHISE- an authorization granted by a government or company to enabling thrm to carry at
specified commercial activities. (two parties involved, franchisor&franchisee)

FRANCHISE AGREEMENTS (UNDER US GAAP it is contract based)

1.) Between the government and private enity/ individual, permitted to use public property
a.) Use of public water for internisland shipping
b.) Use of public land for telephone and electric lines
c.) Use of streets and highways for bus line
2.) Between private entities or individuals (same system as franchisor) (palit ang system kay taas
ang succes rate)

MEASUREMENT OF FRANCHISE (COST= INITIAL FRANCHISE FEE)

Initial franchise fee (lump sum payment) plus directly attributable cost

Not all the times the account title franchise is recorded immediately, these question should be answered

S- substantial performance has rendered? (naa say dapat buhaton si franchisor para good to go na maka
operate ang franshisee sa system sa franchisor?

P- period of refund elapsed? (na lapas na ang period of refund, di na pwede ka back out)

C-collection is reasonably certain? (legit, if sure naba nga nay receivable ang franchisor)

PERIODIC FRANCHISE FEE- the treatment is expensed outright

(basta naa pakas contrata, padayon kag bayad)(just additional fee, bisag wala ang periodic franchise fee,
magamit ra japon ang franchise, nahog lang nga income ni siya sa part sa franchisor)

AMORTIZIATION OF FRANCHISE- it depends

Definite life- useful life or definite period whichever is shorter plus impairment (useful life kay is the
range year where the business is profitable even mas taas ang year sa agreement but it is not profitable
already then it is useless, that’s why the shorter is choose)

Indefinite life- tested for impairment atleast annully (renewable)

LEASE RIGHT

Lease right is now governed by OFRS 16

-the lessee initially recognized right of use asset for the lease term and lease liability for the obligation to
make lease payments (under the new lease standard)

LEASEHOLD IMPROVEMENT – There is a change on leased property made by the lessee

Examples are building, walk, pavements, landscaping, driveway made on leased land lighting
installations, repairs, partitions made on leased building prior to occupancy.

Leasehold improvements reverts/returns to the lessor upon termination of the lease contract

Leasehold improvement shall be depreciated over the lease term or useful life of the improvement,
whichever is shorter

Residual value is ignored in computing depreciation because legally the improvement becomes the
property of lessor upon termination

Renewal option that too uncertain should be ignored in determining the lease term, but the renewal of
the least contract that is highly certain will be consider in determining extended lease term