Accounting for natural resources

Since natural resources are treated as inventory before they’re sold, how are they expensed on the income statement once sold- i.e. COGS or depletion?


vnysot, 1. Tangible Assets (PP&E) are depreciated over the useful life of the asset 2. Intangible Assets (Patents/Trademarks/Copyrights) are amortized over the period for which they provide the benifits. 3. Natural Resources are depleted over the units of usage over time. - Dinesh S

I believe if trandemarks are internally developed that you do not amortize is. Might want to double check that.

Killabee (Wu forever, BTW), internally developed trademarks are expensed as the expenses are incurred. You can amortize the expense of purchasing an external trademark over the useful life of the asset. -Little Baby Jesus

Check out this thread for more details…,520143,520143#msg-520143

Actually, I think trademarks have an indefinite life and are not amortized. Copyrights and patents are amortized.

Could anyone let me know what is the motto of FASB behind not letting Goodwill amortize over it’s life, rather now, it should undergoes the annual impairment test to see if this ‘goodwill’ account goes below the fair market value to trigger the write-off/ write-down process? Wasn’t Goodwill accounting following the Matching principle perfectly?

Apcarlso, This is what I think about brands and trademarks, but then, I am a baby at accounting and could be wrong. 1. All costs of (in-house) developing a brand/trademark are expensed (legal fees can still be capitalized). 2. All cost of acquiring (from other entities) a brand/trademark are capitalized - Dinesh S

Dinesh, that’s how I remember it from Level I. Don’t remember the caveat about legal fees, though. This is straight from Schweser: Intangible assets have no physical existence, but legal rights confer benefits to the asset’s owner. Intangible assets include things like trademarks, brand names, patents, and copyrights. Typically, intangible assets are only recorded on the balance sheet when they are purchased from another firm. All costs for developing intangible assets internally are expensed as incurred. The process of accounting for goodwill is different from the process for other intangible assets. According to U.S. GAAP, goodwill is not amortized, but is subject to an annual impairment review. Each year, a company must calculate the fair market value of its goodwill. If the fair market value is less than the carrying value on the balance sheet, the goodwill is said to be impaired. If impairment occurs, the carrying value of the goodwill account is reduced to its fair market value and an impairment charge is recorded on the income statement.

> Could anyone let me know what is the motto of FASB behind not letting Goodwill amortize over it’s life Well, does the value of say the Starbucks brand decline over time? Does it wear out a little each time someone buys a cup of coffee?

ohh…got it Darien, Thanks!! - Dinesh S

Dinesh - I agree with point 1 and point 2. However, I think that amortization is generally more suitable for copyrights and patents rather than trademarks or brand names. If a trademark has an identifiable useful life, then it is appropriate to amortize the asset over that useful life. However, the useful life of a trademark is often times unquantifiable or deemed indefinite. If this is the case, amortization is forgone. The crux is, does the asset have a identifiable useful life? The rule of thumb to remember is that intangible assets should be amortized over their useful life. You are correct regarding the capitalization and expensing of associated costs. Hope that helps. Let me know if it doesn’t.