Intangible assets can make up a significant portion of a company's balance sheet. One of the...

Intangible assets can make up a significant portion of a company's balance sheet. One of the issues with intangible assets is determining the value and useful life so that their cost can be allocated among the asset's life.

What are some methods companies use to determine the value and useful life of an intangible asset?

Expert Solution

Answer)

When intangible assets purchased externally then it's value is purchase price and useful life is agreement period.

Methods used by companies to determine the value of an internally constructed intangible assets are:

1)Cost method:The cost incurred for building the intangible assets are generally shown as value of such intangible asset.

2)Market value:The try to estimate the value of the asset based on market value of the asset and recorded in books based on such valuation.

3)Income method:In this method the revenue that intangible asset is expected generate will be shown as value in books of accounts.

Coming to useful life of intangible asset,an intangible asset may be considered for indefinite period or any other limited period but at regular intervals the conditions in the markets are evaluated by the company and make necessary adjustments to to the life of the assets if such changes are required.

ekkarill92 answered 2 years ago

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