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Amortization is recorded in the financial statements of an entity as a reduction in the carrying value of the intangible asset in the balance sheet and as an expense in the income statement. Under International Financial Reporting Standards , guidance on accounting for the amortization of intangible assets is contained in IAS 38. [ 1 ]
Research and development (known also as R&D [2]) is considered to be an intangible asset (about 16 percent of all intangible assets in the US), [11] even though most countries treat R&D as current expenses for both legal and tax purposes. [2] Most countries report some intangibles in their National Income and Product Accounts (NIPA).
An asset should also be impaired in accordance with IAS 36 Impairment of Assets if its recoverable amount falls below its carrying amount. [1] Recoverable amount is the higher of an asset's fair value less costs to sell and its value in use (estimate of future cash flows the entity expects to derive from the asset).
In addition research and development expenses can only be recognised as an intangible asset if they cross the threshold of being classified as 'development cost'. [ 22 ] Whilst the standard on provisions, IAS 37, prohibits the recognition of a provision for contingent liabilities, [ 23 ] this prohibition is not applicable to the accounting for ...
In tax law, amortization refers to the cost recovery system for intangible property.Although the theory behind cost recovery deductions of amortization is to deduct from basis in a systematic manner over an asset's estimated useful economic life so as to reflect its consumption, expiration, obsolescence or other decline in value as a result of use or the passage of time, many times a perfect ...
24: Accounting for Intangible Assets : 1944 December 25: Accounting for Terminated War Contracts : 1945 April 26: Accounting for the Use of Special War Reserves : 1946 October 26 Addendum: Limitation of Scope of Special War Reserves : 1951 July 27: Emergency Facilities : 1946 November 28
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An asset depreciation at 15% per year over 20 years [1] In accountancy, depreciation is a term that refers to two aspects of the same concept: first, an actual reduction in the fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wears, and second, the allocation in accounting statements of the original cost of the assets to periods in which ...