Get Regulation 209709-94 - Amortization Of Intangible Property

In 2014, the FASB introduced accounting alternatives6 for private companies whereby goodwill can be amortized over 10 years or less, in which case the impairment test is simplified in addition to being trigger-based. In 2017, the FASB simplified7 goodwill impairment testing requirements for all companies.

Intangible assets with infinite life, such as goodwill, are not amortized and therefore do not appear on the company's balance sheet.

General Guidelines 1. The amortization of an asset should only start when the asset is brought into actual use, and not before, even if the requisite intangible asset has been acquired. 2. The level of amortization should be appropriate so that the book value of an asset is not under or overstated.

The useful life of intangible assets is the duration it contributes to your business's value. For example, a patent that lasts 20 years would have a useful life of 20 years. Which intangible assets are amortized? You can only amortize intangible assets that have a finite useful life, like the patent mentioned above.

You must generally amortize over 15 years the capitalized costs of "section 197 intangibles" you acquired after August 10, 1993. You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income.

Amortization of intangibles, also simply known as amortization, is the process of expensing the cost of an intangible asset over the projected life of the asset for tax or accounting purposes. Intangible assets, such as patents and trademarks, are amortized into an expense account called amortization.

If an intangible asset has a perpetual life, it is not amortized. Consequently, if an intangible asset has a useful life but can be renewed easily and without substantial cost, it is considered perpetual and is not amortized.

Under Section 197, you should amortize all acquired intangible assets over 180 months, or 15 years, regardless of the asset's useful life. Amortization of Section 197 assets is done on a straight-line basis. This means that each year for 15 years, you will deduct 1/15th of the acquisition cost of that amortized asset.