Intangible Assets Theory It Has Been Argued on the Grounds of Conservatism That

question 57

Essay

Intangible assets theory
It has been argued on the grounds of conservatism that all intangible assets should be written off immediately after acquisition. Discuss the accounting arguments against this treatment.

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Definitions:

Unrealized Holding Gains

Increases in the value of assets that an entity holds but has not yet sold, and thus are not reflected in the income statement until sold.

Absorption Costing

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Production Costs

Expenses directly associated with the manufacturing of goods, including materials, labor, and overhead.

Variable Costing

A cost accounting method that includes only variable production costs in unit product costs, and treats fixed costs as period expenses that are charged against revenue in the period they are incurred.