Question
Texting Sharks is a new firm that specializes in sending out marketing messages to prospective clients. As part of the business the company acquires a
Texting Sharks is a new firm that specializes in sending out marketing messages to prospective clients. As part of the business the company acquires a large number of customer lists (intangible assets). The company is a startup, and has been in existence for one year.
In the second year, as the company expands the owner decides to hire an accountant (you). Previously the owner is the one who has been handling all of the accounting. The owner decided that the customer lists all had indefinite lives. Once you are hired you realize that the customer lists do have useful lives (ranging from 2-5 years).
The customer lists have not been impaired in the past year.
Requirements:
Write a brief informal memo explaining the treatment below and your reasoning for this treatment.
This is what the codification says:
If an intangible asset that is not being amortized is subsequently determined to have a finite useful life, the asset shall be tested for impairment. That intangible asset shall then be amortized prospectively over its estimated remaining useful life and accounted for in the same manner as other intangible assets that are subject to amortization.
So explain how we would treat this case and why.
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