Question

The straight – line (SL) method is often used for intangible property such as patents. True or False?

Answer 1

A patent is basically a licence for a said period to exclude other from making, using or selling an invention. An intangible asset is a non- physical asset on the company's Balance sheet. There are many intangible property such as trademark, goodwill, intellectual property and patent is one among them. An intangible asset does not have a physical existence and provides a long term value to the owning entity. The accounting for a patent is the same as for other intangible assets.

The most common method used for amortization (Accounting method like depreciation)  and accounting is the straight line method. The owner of the patent gradually changes the cost of the patent to expense over the useful life of the patent. This is done using the straight line method.

Intangible assets have a useful life that is either identifiable or indefinite. Intangible assets with identifiable useful lives are amortised on a straight-line basis over their economic or legal life, whichever is shorter.

The annual expense recognised as a result of straight line amortization is simply the cost of the intangible asset divided by the number of years in it’s estimated useful life

Thus the method used for accounting intangible property is the straight line method and the answer to this is True.