Question
Determining the useful life of an intangible asset should generally be based on the lesser of managements estimate of the period of time over which
Determining the useful life of an intangible asset should generally be based on the lesser of management’s estimate of the period of time over which it is expected to produce benefits (such as cash flows), legal, regulatory, or market-related factors (obsolescence, competition, etc.) that may limit its useful life. What useful life would you estimate for the following intangible assets?
c. An acquired copyright that has a remaining legal life of 50 years. An analysis of consumer habits and market trends provides evidence that the copyrighted material will generate cash flows for approximately 30 more years.
d. An acquired broadcast license that expires in five years. The broadcast license is renewable every 10 years if the company provides at least an average level of service to its customers and complies with the applicable Federal Communications Commission (FCC) rules and policies and the FCC Communications Act of 1934. The license may be renewed indefinitely at little cost and was renewed twice prior to its recent acquisition. The acquiring entity intends to renew the license indefinitely, and evidence supports its ability to do so. Historically, there has been no compelling challenge to the license renewal. The technology used in broadcasting is not expected to be replaced by another technology any time in the foreseeable future. Therefore, the cash flows from that license are expected to continue indefinitely.
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c Useful life is the estimated lifespan of a depreciable fixed asset during which it can be expected ...Get Instant Access to Expert-Tailored Solutions
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