Below Are Several Intangible Assets

question 81

Essay

Below are several intangible assets. For each case suggest whether the item should be amortized. If amortization is recommended, what is the useful life that it should be amortized over? Provide justification for your recommendation.
a. Aye Corp purchased a brand name for $1,000,000. The firm has the exclusive right to use this name forever.
b. Bee Corp has developed a strong corporate reputation and its products are highly sought-after in the luxury goods market. Last year, $40,000,000 was spent on advertising its brand in top-tier fashion magazines and at the top fashion shows around the world.
c. Cee Corp paid $25,000,000 for the five-year exclusive privilege to have a famous celebrity endorse and use the company's sports equipment. This contract entitles Cee to renew the contract for a further two-year exclusive endorsement arrangement for a fixed fee of $10,000,000, due midway through the last year of the current contract.

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Definitions:

Tube Feet

Structures characteristic of echinoderms; function in locomotion and feeding.

Spiny Skin

A characteristic feature of echinoderms, a phylum of marine animals that includes sea stars, sea urchins, and their relatives, distinguished by their spiny skin and radial symmetry.

Birth Weight

The weight of a newborn measured shortly after birth, an important indicator of neonatal health and development.

Gestational Age

The age of an embryo or fetus (or newborn) calculated from the first day of the mother's last menstrual period.