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.

---

Definitions:

Combustion Chamber

The enclosed space within an engine where fuel combustion occurs, driving the pistons and producing power.

Ignite

To set alight or begin to burn; in automotive terms, refers to the initiation of combustion.

Passive

Pertaining to systems or components that operate without active electronic control or input from the user.

Continuous

Something that occurs without interruption, in automotive terms, can refer to processes or systems that operate unceasingly.