FRANCHISE
DEFINITION;
 An authorization granted by a government or
company to an individual or group enabling them to
carry out specified commercial activities.
Franchise Agreement (Contract- Base);
a) Between the Govt. and Private Entity/ Individual
• Use of public water for inter island shipping
• Used of public land for telephone and electric lines
• Used of streets and highways for a bus lines
b) Between Private Entities or individuals
MEASUREMENT: (COST = INITIAL
FRANCHISE FEE)
 S – Substantial performance has been related?
 P – Period of refund elapsed?
 C – Collection is reasonable certain?
 Periodic Franchise Fee = Exposed outright
Amortization & Impairment
DEFINITE LIFE = Should be amortized over the
definite period
INDEFINITE LIFE = Tested for impairment at
least annually
 RESEACH AND DEVELOPMENT COST
RESEACH
 Original and planned investigation undertaken
with the prospect of gaining scientific or
technical knowledge and understanding.
EXAMPLES:
a) Laboratory research aimed at discovering or
obtaining new knowledge
b) Searching for application of research finding
and other knowledge
c) Conceptual formulation and design of possible
product or process and alternative
d) Testing in search for product or process
alternative
DEVELOPMENT
 The application of research findings or other
knowledge to a plan or design for the
production of new or substantially improved
material, device, product, process system or
service, prior to the commencement of
commercial production.
 RESEACH AND DEVELOPMENT COST

CRITERIA FOR RECOGNITION f. The ability to measure reliably the expenditure

(DEVELOPMENT - CAPITALIZATION) attributable to the intangible asset during the
a. Technical feasibility of the intangible asset so development
that it will be available for use or sale
b. The intention to complete the intangible asset
use/sell it.
c. The ability to use or sell the intangible asset
d. How the intangible asset will generate probable
future economic benefits
e. Availability of revenues or funding to complete
development and to use or sell the asset
 RESEACH AND DEVELOPMENT COST

process
EXAMPLES;
a) Design construction and testing of pre-
NOT CONSIDERED AS RESEARCH
production prototype and model. AND DEVELOPMENT;
b) Designs of tools, jigs, molds, and dies Commercial Production
involving new technology Routine (in production)
c) Design construction and operation of a pilot Periodic
plant that is not of a scale economically
feasible to the entity for commercial
production.
d) Design construction and testing of a chosen
alternative for new or improve product or
 COMPUTER SOFTWARE

DEFINITION; MEASUREMENT: INTERNALLY DEVELOPED

Instructions that tell a computer what to do. COMPUTER SOFWARE;
 Expense = research stage
CLASSIFICATION;  Capitalized = technological feasibility is
 Intangible Asset = general rule established proof detailed program design
 Inventory = purchase for resale working model
 Property plant and equipment = purchase as an
integral part of a computer controlled machine COST
tool that can not operate without the specific  Cost of coding and testing
software.  Cost of produce
 COMPUTER SOFTWARE

AMORTIZATION;
 Pattern that reflects the expected future economic
benefits
 Straight line

IMPAIRMENT;
 Whenever there is an indication
 BROADCASTING LICENSE

DEFINITION;
 A type of spectrum license granting the license
permission to use a portion of the radio frequency
spectrum in a given geographical area for
broadcasting purposes.
 INDEFINITE LIFE; TESTED FOR IMPAIRMENT
 FINITE LIFE; AMORTIZED
 AIRLINE RIGHT

DEFINITION;
 A route authority. A property right to the space above
a surface area or object

 INDEFINITE LIFE; TESTED FOR IMPAIRMENT

 WEBSITE DEVELOPEPMENT COST

DEFINITION;
 Developed for the purpose of promoting and
advertising an entities products and services.

 ACCOUNTING TREATMENT; EXPENSE AS

INCURRED
 CUSTOMER LIST

DEFINITION;
 A customer database continuing the name, contract
information, order history and other vital social
statistics, such as birth death and even sickness.

 INTERNALLY GENERATED; EXPENSE AS

INCURRED
 PURCHASED; “MAY” BE CAPITALIZED
 ORGANIZATION COST

DEFINITION;  ACCOUNTING TREATMENT; EXPENSE AS

 Cost incurred in forming or organizing corporation INCURRED. However, share issuance cost shall be
debited to share premium arising therefrom.
 Legal fees
 Incorporation fees  Share issuance cost account; Contra equity
 Share insurance cost a) other share premium
b) Retained earnings
THANK YOU!