Assets - Natural Resource Assets

Classification of Natural Resource Assets
Intangible assets are identifiable non-monetary resources that have no physical substance but provide the company controlling them with a benefit. Intangible assets can be internally created or acquired from a third party. If intangible assets are acquired in an arm's length transaction, their recognition and measurement will be similar to those of tangible assets. Internally developed intangible assets are accounted for in a wide range of ways. Intangible assets include research and development costs, patents, trademarks and goodwill. Intangible assets are depreciated over their estimated life and they are done so by the use the straight-line depreciation method. Intangible assets cannot have an estimated life of more then 40 years.


Unlike other intangible assets, goodwill is no longer an asset that can be depreciated. As of July 2001, the Financial Accounting Standards Board (FASB) adopted the Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, which sets new rules for goodwill accounting. SFAS 142 eliminates goodwill amortization and instead requires companies to identify reporting units and perform goodwill impairment tests.

Example
Company ABC acquires a company for $20m. The acquired company's fair market value was $18m. ABC has also acquired a patent for $2m that has an estimated remaining life of 10 years.

Journal entries:

Effects of Capitalizing Vs. Expensing
Related Articles
  1. Professionals

    DCF Vs. Comparables: Which One To Use

RELATED TERMS
  1. Personal Financial Advisor

    Professionals who help individuals manage their finances by providing ...
  2. CFA Institute

    Formerly known as the Association for Investment Management and ...
  3. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly ...
  4. Security Analyst

    A financial professional who studies various industries and companies, ...

RELATED FAQS

  1. What are the differences between a Chartered Financial Analyst (CFA) and a Certified ...

    Understand the differences between a Chartered Financial Analyst and a Certified Financial Planner. Learn how each approaches ...
  2. How do I become a Chartered Financial Analyst (CFA)?

    Understand what it means to hold the Chartered Financial Analyst designation. Learn how a candidate can work to become a ...
  3. What types of positions might a Chartered Financial Analyst (CFA) hold?

    Understand what types of positions a Chartered Financial Analyst can hold. Learn what is available to those who have only ...
  4. Who benefits the most from prepaid expenses?

    Learn who benefits most when expenses are prepaid. Individuals and businesses often make payments, such as rent or insurance, ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!