Question

Assume that Your Company acquires My Company in business combination. My Company has a patent for its production process. Search the FASB ASC database to enable you to answer the following questions related to the patent. My Company incurred significant cost to develop the patent.  On the date of the business combination, the patent is 10 years old and has a useful life of 15 years.

1. According SFAS No. 2 (see FASB ASC 730), how should My Company have accounted for the patent? Would you expect My Company to report an asset for the patent in its balance sheet?
2. If My Company does not report an asset for the patent, will Your Company report one?

If so, how will Your Company measure the initial value to record ( or report) for the patent?

3. My Company purchased the patent from another company three years ago. The patent had a remaining useful life of 12 years when it was purchased. Will the valuation of the patent by My Company be the same as it would be under part b above? Explain.

Answer 1

The intagible quality ought to be recognised by 'My company' if the subsequent criteria square measure satisfied:

The cost may be realiably measured.

Future economic edges square measure expected to flow to the entity

The 'your company' can report the intagible quality if it's paid worth to amass it.

The intangible ought to be recorded at the value of acquisition.

Yes the valuation can stay same as in one b) that's quantity paid to acuire the intangible.

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