Intangible 1 is a license granted by the federal government to HL that allows the company to
Question:
Intangible 1 is a license granted by the federal government to HL that allows the company to provide essential services to a key military installation overseas. The license expires every five years, but is renewable indefinitely at little cost.Because of the profitbaility associated with this license, HL fully expercts to renews it continually. The license is very marketable and will generate cash flows indefinitely.
Intangible 2 is a non- competition convenant acquired by HL when the company bought out a major owern-managed competitor. The seller signed a contract in which she agreed not to set up or work for another business that is in direct or indirect competition with HL. The projected cash flows resulting fromt his agreement are expected to continue for atleast 25 years.
Intangilble 3 is medical files. One of HL's subsidary companies owns serveral medical clinics. A recent purchase of a retiring doctor's practice required a significant payment for the practice's medical files and clients. HL believes that this base will benfit the business for as long as it exists, providing cash flows indefinitely.
1. Does each intangible as described above qualify to be recognized as an intangible asst? Explain briefly?
2. Identify the appropriate method of accounting for each intangible described above after acquistion, and explain the decisions you have made.
(Consider IFRS IAS no 38)
Cost Accounting Foundations and Evolutions
ISBN: 978-1111626822
8th Edition
Authors: Michael R. Kinney, Cecily A. Raiborn