Xyz Research Company Case Summary

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MEMORANDUM
Date:

To: XYZ Research Co.

From:

Subject: Accounting Treatment for Patents

XYZ Research Co, (XYZ) came to our firm, requesting clarification on the accounting treatment for patents the company purchased.

1. FACTS
 The company possesses many patents and has historically expensed all of the costs associated with obtaining their patents.

 The company is unsure if any or all of its patent costs can be capitalized.

 The company is unsure if impairment testing should be done periodically on their patents.

2. ISSUES
a) Should any costs related to purchasing patents be capitalized?
 What costs should be capitalized?
 What costs
 Amortization is required: amortize patents over their useful life.

 Perform impairment tests on patents annually.

 When the market value is lower than the book value; recognize the difference between market value and book value and record that as loss on Income Statement.

 The proper accounting treatment is imperative to ensure XYZ’s financial statements are properly published.

REFERENCES

FASB ASC 350-30-35-2 Intangibles- Goodwill and Other
FASB ASC 350-20-35-2 Intangibles- Goodwill and Other
FASB ASC 360-10-35-21 Property-Plant-and Equipment
IRS. (2014). Research and experimental cost defined. Retrieve from http://www.irs.gov/publications/p535/ch07.html
United States Patent and Trademark Office. (2014). Patents. Retrieved from http://www.uspto.gov/inventors/patents.jsp#heading-1

===============================================================
MEMORANDUM
Date:

To: XYZ Research Co.

From:

Subject: Accounting Treatment for Patents

XYZ Research Co, (XYZ) came to our firm, requesting clarification on the accounting treatment for patents the company