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Conceptual Question: Determine a patent's carrying value after a change in estimate. Example: change in estimate...

Conceptual Question: Determine a patent's carrying value after a change in estimate. Example: change in estimate of patent's useful life.

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Answer #1

Assets are to be tested periodically for their impairment or revision in estimates such as Useful Life or Salvage Value.

In such case, patent's carrying may have to be revised and amortization schedule be changed.

1. Patent's Value may be amortized proportionately over the amount of benefits derived from them during their life. If there is change in estimation of benefits, then the amortization may have to be relooked and also the Carrying Value of Patent may require change.

2. Change is Useful life may have an impact on the carrying value as in this case also the amortization will vary.

Carrying Value has to be determined taking into account the fair value of the Patent. Fair Value may be calculated as Present Value of Future benefits or as Market Value of the Patent.  

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