Please, create a main discussion post about the below question with at least 2 citations and respond to he classmates discussion posts attached.
What is an intangible asset? How is the cost of an intangible asset amortized? In your response, provide at least one example. Include appropriate citations. (Citations only needed for main post)
Thank you
Instructions for main post (Around 200 words) What is an intangible asset? How is the cost of an intangible asset amortized? In your response, provide at least one example. Include appropriate citations. (Citations only needed for main post) Instructions for the two classmate responses (around 150 words each) Please, respond to the below two classmate main posts. (Please, the responses need to be a discussion, not an evaluation. You can agree with them and add/comment about their response.) Citation Classmate post #1: Maurice naylon As one may deduce from the name, defining intangible assets has proven to be a difficult task. One prominent accountant, Kohler, defined intangibles as “capital assets having no physical existence and whose value depends on the rights and benefits that possession confers to owner” (in Shroeder et al, 2017, p. 314). Examples of intangibles supporting this definition include the following: patents, copyrights, franchises, leaseholds, and goodwill. And, these examples support a clarification of the above definition, that is, intangible assets “derive their value from the special rights and privileges they convey” (Shroeder et al, 2017, p. 314). From patents to goodwill, possession of these unique assets provides the owner clear rights and privileges. Similar to other long-term assets, accounting for intangible assets can be a challenging task. For initial valuation, “cost includes all expenditures necessary to acquire an individual asset and make it ready for use” (Shroeder et al, 2017, p. 314). In this fashion, intangible assets are similar to purchasing real estate, for example. Furthermore, the matching principle “dictates that the cost of intangible assets be apportioned to the expected periods of benefit,” with the APB’s Opinion No. 17 concluding that “intangible assets should be amortized by systematic charges to income over the estimated period to be benefited” (Shroeder et al, 2017, p. 315). For example, if Apple submits and receives a patent for a new piece of smartphone technology, the company should first account for all initial costs associated with gaining that patent to establish its initial valuation. Next, with respect to this technology, the company should assess what it deems to be the effects of obsolescence, that is, when will this patent no longer provide economic benefit due to other technological growth? Whatever that period is assessed to be – say, four years - Apple should amortize the initial costs of the patent over that four-year period. References Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2017). Financial accounting theory and analysis: Text and cases (12th ed.). Hoboken, NJ: Wiley. Classmate post # 2: Ekaterina Cafano Intangible assets are assets that have no physical existence. The value and the useful life of intangible assets is difficult to determine due to the nature of its existence. The examples of intangibles are copyrights, patents, franchises, goodwill, etc. Just like with tangible assets, the cost of the intangible assets must be allocated among the periods the company is getting a benefit from the asset. The company must also to account for an impairment factor that surround the tangible assets. Intangibles can be internally developed or gained outside of the company. The value of externally acquired intangibles is the cost that was incurred in order to obtain the asset. This cost should be recorded by the company and amortized over a useful life of the asset. Per SFAS 2, the cost of internally developed intangibles, such as patents are expensed in the period it incurred as part of the research and development costs. The assets that are hard to identify, such as goodwill should also be deducted from the income when incurred. Reference Schroeder, R. G., Clark, M., & Cathey, J. M. (2017). Financial accounting theory and analysis: Text and cases. Hoboken, NJ: Wiley.