Determining the useful life of an intangible asset should generally be based on the lesser of manage-

ments 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?

a. An acquired customer list. A direct-mail marketing company acquired the customer list and

expects that it will be able to derive benefit from the information on the acquired customer list for

at least one year but for no more than three years.

b. An acquired Patent that expires in 15 years. The product protected by the patented technology is

expected to be a source of cash flows for at least 15 years. The reporting entity has a commitment

from a third party to purchase that Patent in 5 years for 60 percent of the fair value of the Patent

at the date it was acquired, and the entity intends to sell the Patent in 5 years.

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.

e. An acquired trademark that is used to identify and distinguish a leading consumer product

that has been a market-share leader for the past eight years. The trademark has a remaining

legal life of 5 years but is renewable every 10 years at little cost. The acquiring entity intends

to continuously renew the trademark, and evidence supports its ability to do so. An analysis of

product life cycle studies; market, competitive, and environmental trends; and brand extension

opportunities provides evidence that the trademarked product will generate cash flows for the

acquiring entity for an indefinite period of time.