Intangible Asset – An identifiable nonmonetary Recognition of Goodwill:

asset without physical substance. ✅ Purchased Goodwill - “Yung binili mo”

❎ Internally Generated Goodwill

Essential Criteria:
 Identifiability - separable
 Control – You can enjoy the asset/ benefits GOODWILL arises when earnings exceed normal
 Future Economic Benefits earnings by reason of:
Identifiable Intangible Assets: - good name;
a) Patent - capable staff and personnel;
- high credit standing;
b) Copyright
- reputation for fair dealings;
c) Franchise
- reputation for superior products;
d) Trademarks/Brand-name
- favorable location and a list of regular customers.
e) Customer List
f) Computer Software Measurement of Goodwill:
g) Broadcasting License, Airline Right, and Fishing
 By Residual Approach
Right.
Acquisition Price xxx
Unidentifiable Intangible Asset: Goodwill (A - Lia):FMV of “net assets” (xxx)
Measurement: Goodwill xxx
Cost Model  By Direct Approach
Initially: Cost Subsequently 1. Purchase of “average excess earning”
Revaluation Model
Average Earnings xxx
Classification: Normal Earnings (xxx)
 Intangible Asset with definite life
Ave. Excess Earnings xxx
 Intangible Asset with indefinite life
Multi. by:Yrs of Excess Earning x
Amortization is the systematic allocation of the Goodwill xxx
amortizable amount of an intangible asset over is useful 2. Capitalization of “average excess earning”
life. Average Excess Earning xxx
Divide: Capitalization Rate x%
Initial Measurement: COST Goodwill xxx
a) Separate Acquisition – “Cash payment” 3. Capitalization “average earnings”
b) Acquisition as part of business combination Average Earnings xxx
- Fair Value Divide: Capitalization Rate x%
c) Acquisition by way of government grant NA, Including goodwill xxx
- Fair Market Value NA, excluding goodwill (xxx)
- Zero or Nominal Value + Directly Goodwill xxx
attributable cost 4. Present Value Method (modification by no. 1)
d) Acquisition by exchange + CP Average Earnings xxx
- (Commercial Substance) FMV asset given up Normal Earnings (xxx)
- (w/o CS) CA of asset given up Ave. Excess Earnings xxx
e) Internally generated Multi. by: Yrs of Excess Earning @PV x
- Directly attributable cost (materials, labors) Goodwill xxx

Subsequent Expenditure: Impairment of Goodwill

-Generally, treated as expense o Not amortized
-Capitalized if it can “enhance” the o Tested for impairment atleast annually and
Intangible Asset whenever there is an implication of impairment
Derecognition:
- On disposal Negative Goodwill: “Gain” (nabili mo ng mura)
- When “no economic benefits are expected Acquisition Price xxx
from use and disposal of the asset”
 FMV of “net assets” (xxx) Purchased
Gain on bargain purchase xxx  Purchase Price
 Directly attributable cost
PATENTS is an exclusive right granted by - Legal
After Life (R.A. No. 8293)
we capitalized 20 years
and after “Definitethe
we measure Life “
the government to an inventor enabling him/her to initially,
Do we need to amortized? It depends
control the manufacture, sale or other use of
 Definite life – Amortized.
invention for a specified period of time.  Indefinite life – Not Amortized.
Measurement of Patent
 By Purchase/Initially: Legal Life: 10yrs and may be renewed for periods of
a) Purchase Price “magkano mo binayaran” 10yrs each. renewable
b) Import Duties “pag galing overseas” -meaning pag gusto mo iparenew after 10 yrs of legal
c) Nonrefundable Taxes life, pwede ma renew.
d) Any directly attributable cost of preparing the
asset for the intended use Impairment of Trademark: whenever there is an
indication that the trademark may be impaired.
 By Internally Generated:
a) Licensing and other related legal fees in
Cost of Litigation yung mga kaso na na pinasok ng
securing patent rights
trademark
b) Development cost* (from the time of
Successful
technological, feasibility up to before
Expense
commercial production)
Unsuccessful

Amortization of Patent
o Purchased – remaining legal life or useful life COPYRIGHT – is an exclusive right granted
whichever is SHORTER by the government to an author, composer, or n artist
o Internally Developed – legal life or useful life enabling the grantee to publish, sell or otherwise
whichever is SHORTER benefit from the literary, musical, or artistic work.
o Related Patent – extended life
o Competing Patent – remaining life of old patent Measurement of Copyright:
Internally Developed
Impairment of Patent - Whenever there is an  Licensing Fee
indication of impairment therefore you have to test the  All expenses incurred in the production of the
impairment for the patent every year end of the work
Purchased
reporting period.
 Purchased Price
 Directly Attributable cost
Cost of Litigation Amortization of Copyright: (Definite Life)
Successful
 Useful Life
Expense
 Write off against the revenue of 1st printing
Unsuccessful

TRADEMARK – is a symbol, sign, slogan or name Impairment of Copyright - Whenever there is an

used to mark a product to distinguish it from other indication of impairment therefore you have to test the
products. impairment for the patent every year end of the
reporting period.
Measurement of Trademark:
Internally Developed Protection of Copyright (Legal life) - Life of the
 Filing fees author + 50yrs after his/her death
 registry fees
 design cost