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Pendergrass Company: amortize patent over legal life?

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Pendergrass Company hires an accounting intern who says that intangible assets should always be amortized over their legal lives. Is the intern correct?

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Solution Summary

Your tutorial is 262 words plus a reference that explains the amortization life for intangibles and gives an example to illustrate. A quote from the FASB codification is given.

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No, the authoritative literature, the Financial Accounting Standards Board (FASB) codification states that "The accounting for a recognized intangible asset is based on its useful life to the reporting entity." (FASB ASC 350-30-35-1). What this means is that the useful life of the intangible is the expected time period that the intangible asset will serve the firm and be using in generating revenues or reducing costs (or both).

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