![]() ![]() If there is impairment, the difference between the fair value and carrying amount is charged to the asset, resulting in a reduction of the carrying amount to its fair value. Impairment occurs when the fair value of the asset declines below its carrying amount. Instead, it is periodically tested to see if the recorded cost of the asset has been impaired. ![]() If an intangible asset is considered to have an indeterminate life, it is not amortized at all. Amortization is the same as depreciation, with the intent of gradually reducing the carrying amount of the asset to zero, thereby accounting for the gradual consumption of the asset. ![]() Once recorded as an asset, an intangible asset is amortized over its useful life, typically using the straight-line method of amortization. In order to record an intangible asset in the accounting records, it must be purchased (not developed internally) and have a useful life of longer than one accounting period. An organization usually also has a large number of tangible assets, such as buildings, land, and machinery. ![]() For example, patents, trademarks and copyrights are all documents that you can print on a piece of paper. Sometimes, intangible assets have tangible components. Organizations that have invested large sums to establish brands may find that the value of their intangible assets greatly exceeds the value of their physical assets. Tangible assets include land, real estate, vehicles, equipment, machinery, inventory, computer hardware, money, stocks, bonds, furniture and office supplies. Intangible assets are assets that have no physical substance. ![]()
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