This isn't a question I have had to deal with n few years and it seems to have changed, I am working with an early stage consumer products company, that has established a brand for themselves in their industry. In reviewing their books they are amortizing their trademark over 5 years. I have talked to some
Amortize or Expense a Trademark?
Answers
I'm not a professional
Tom,
ASC-350 I've only applied to acquired marks, where you need to do a PPA and allocate the surplus. If that is the case, I would hold onto it and test it for impairment.
If it is a
If you've developed the mark yourself...in my first start-up I bent over backwards to capitalize (and hold pending impairment) these costs. This would have been before my first
The 5 year amortization I don't get...my understanding is that your choices are 15 years for tax and impairment for financial reporting. For example, if I acquired the IBM mark for $1m, that would stay on my books until the test showed that it was worth less than $1M...amortizing it wouldn't make any sense at all.
There really is no wrong answer for your non-question, but it creates confusion. Accounting is very direct about what you can and can't do, but not in this situation. You can choose whatever approach is better for your situation. Just be consistent, i.e. whatever decision you make you will need to stick with. Simply stated your choices are as follows --
Option 1 - Capitalize vs Expense will result in higher profits, resulting in higher taxes; and,
Option 2 - Expense vs Capitalize will allow you to take the loss today, resulting in lower taxes today.
Valuation will be higher by capitalizing - which you may want if you are looking for bank financing. But you also add a bunch of entries if you capitalize, i.e. depreciation every month vs one and done.
1
Observation: Bank financing on IP can be either a) flaky, in other words, it depends on the bank, the banker and the week or b) very expensive why you try to get appraisals trying to prove its value.
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Accounting