TRADEMARK

COPYRIGHT
SAMPLE PROBLEM

Manginsay, Adrienne Therese

Megallen, Rhea
Melencion, Ma. Jeramae
Mero, Renz Breneli
Mesiona, Fritcel Ann
Milisimo, Bethany Seth
Mira, Fel Jamace
Paglinawan, John Alison
Quilaton, Anilen
Raotraot, Nerizza Mae
I. Trademark
- Definition of Trademark
- Accounting for Trademark
- Impairment of Trademark

II. Copyright
- Definition of Trademark
- Measurement
- Amortization of Copyright

III. Problem Solving

- Boracay Company
- Raven Company
- Royal Company
TRADEMARK
A trademark is a symbol, sign, slogan or name used to mark a
product to distinguish it from other products.
The terms trademark, trade name and brand name are
interchangeably used

Under US GAAP, a trademark is a market-related intangible asset.

ACCOUNTING FOR TRADEMARK

Purchased Internally Generated
Cost - Purchase price - All directly attributable
- Directly attributable cost cost
Amortization Not Amortized, renewable indefinitely
IMPAIRMENT OF TRADEMARK
Legal life – 10 years may be renewed for periods of 10 years each
Trademarks will be tested for impairment at least annually or whenever there is an
indication that it may be impaired.

Illustration:
At the beginning of the current year, an entity acquired a trademark for 3,000,000
and has a remaining legal life of 8 years. The trademark is expected to generate cash
flows of 250,000 per year. The appropriate discount is 10%.
Journal entries:

to record acquisition Trademark 3,000,000

Cash 3,000,000

To record amount
Carrying impairment loss Impairment loss
3,000,000 500,000
Trademark
PV of cash flows or value in use(250,000/10%) 500,000
2,500,000
Impairment loss 500,000
COPYRIGHT
A copyright is an exclusive right granted by the government to the
author, composer or artist enabling the grantee to publish, sell or otherwise
benefit from the literary, musical or artistic work.

Under US GAAP, a copyright is considered an artistic related intangible

asset.

MEASUREMENT

Purchased Internally Developed

Cost - Purchase price - Licensing fees
- Directly attributable cost - All expenses incurred in
the production cost
AMORTIZATION OF COPYRIGHT

The cost of the copyright shall be amortized over the useful life.

Under the Intellectual Property Code of the Philippines, the term of

protection of copyright is:

1.) During the life of the author

2.) 50 years after death

Copyright should be reviewed for impairment at the end of each reporting

period
 The person(s) to be charged with the enforcement of the copyright shall be named
in writing and filed with the National Library after the death of the creator.

In default of such person(s), such enforcement shall devolve upon the author’s heirs
or the default of the heirs, the Director of the National Library.

If the useful life of the copyright cannot be determined reliably, the cost of
copyright is expensed against the revenue from the first publication of copyrighted
material (e.g.,movies & music).
EXAMPLE 1
At the beginning of the current year, Boracay Company bought a
trademark from Lamitan Company for P3,000,000. The entity retained
an independent consultant who estimated the trademark’s life to be
indefinite. The carrying amount of the trademark was P1,500,000 on
the books of Lamitan Company.

Req. What is the carrying amount of the trademark at year-end?

Answer: 3,000,000
EXAMPLE 2

Raven company developed a trademark to distinguish its products from those of

the competitors.

The following costs are incurred:

Marketing research to study customer tastes 400,000
Design cost of trademark 1,500,000
Legal fee of registering trademark 150,000
Advertising to establish recognition of trademark200,000
Registration fee with intellectual Property Office 50,000

Req. What amount should be capitalized as cost of trademark?

Design cost of trademark 1,500,000
Legal fee of registering trademark 150,000
Registration fee with intellectual Property Office 50,000
Total Cost of Trademark 1,700,000
EXAMPLE 3
Royal Company purchased a trademark and incurred the following costs:

Purchase price 1,000,000

Nonrefundable value added tax 50,000
Training of personnel on the use of new trademark 70,000
Research expenditures associated with
the purchase of the new trademark 240,000
Legal cost incurred to register the new trademark 105,000
Administrative salaries 120,000

Req. What amount should be capitalized as cost of the trademark?

Purchase price 1,000,000
Nonrefundable value added tax 50,000
Legal cost incurred to register the new trademark 105,000
Total cost of trademark 1,155,000
T h a n k Yo u F o r L i s t e n i n g !