Below are several intangible assets.
a. A firm paid $135,000,000 to acquire the eternal rights to distribute and collect any such royalties and other fees from the movie that won the Academy Award for best film last year.
b. A firm paid a very' famous retired politician $1,000,000 for the publishing and distribution rights to her forthcoming autobiography. Several other politicians have written such books and most have been financially successful for the publisher.
c. A firm bought the right to all future royalties from a famous rock band’s entire music library for $8,000,000. The firm did a careful net present value analysis based on a 20-year time horizon, and a 20% cost of capital, to come up with the purchase price.
d. A company paid $15,000,000 for the three-year exclusive privilege to have a famous sporting figure endorse and use its sports equipment. This contract entitles the company to renew the contract for a further four-year exclusive endorsement arrangement for a fixed fee of $10,000,000, due midway through the last year of the current contract.
Required:
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.