Consider the following items:
a. A company has advanced $15,000,000 to an advertising agency to develop a branding strategy and advertisements for a new product it plans to launch next year.
b. A firm paid a $4,000,000 fine for infringement of environmental regulations in the past. If this fine were not paid, the company would have been forced to shut down permanently.
c. A team is providing additional training to one of its most outstanding professional hockey players. This athlete is learning a new strategy for scoring. An outside consultant has been hired and additional ice time purchased. The overall cost of this training program is $500,000. The player has three years remaining on his exclusive contract with the team. Careful analysis by experts shows convincingly that this training will increase the team’s likelihood of being successful in the season and playoffs. Currently there are thousands of empty seats over the season that will be occupied if the team improves its standings in the league. Incremental revenue is cautiously estimated to be $1,000,000 per season from improved attendance.
d. Same as (c) above except currently all the seats for every game are sold out, and there are no plans to increase ticket prices.
Required:
For each item above, decide whether an intangible asset arose from the described case and how it might be valued. Please justify your recommendation.