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INTANGIBLES ASSETS
Companies can either (1) purchase intangible assets from other entities (existing patent, copyright, trademark, or franchise rights) or (2) develop intangible assets internally (say, develop a new product or process that is then patented). In either case, we amortize its cost, unless it has an indefinite useful life. Also, just like other operational assets, intangibles are subject to asset impairment rules. we consider the acquisition cost of intangibles. The initial valuation of purchased intangibles usually is quite simple. We value a purchased intangible at its original cost which includes its purchase price and all other costs necessary to bring it to condition and location for intended use. For example, if a company purchases a patent from another entity, it might pay legal fees and filing fees in addition to the purchase price. We value intangible assets acquired in exchange for stock, or for other nonmonetary assets, or with deferred payment contracts exactly as we do other operational assets. Lets look briefly at the costs of purchasing some of the more common intangible assets.

PATENTS
Patent for an invention is grant of exclusive rights to make, use and sell the invention for a limited period of 20 years. The patent grant excludes others from making, using, or selling the invention. Patent protection does not start until the actual grant of a patent. A patent cannot be obtained on a mere idea or suggestion. Patent applications are examined for both technical and legal merit. (OR) A patent is an exclusive right to manufacture a product or to use a process. This right is granted by the Pakistan Patent Office for a period of 20 years. In essence, the holder of a patent has a monopoly on the use, manufacture, or sale of the product or process. If a patent is purchased from an inventor or another individual or company, the amount paid is its initial valuation. The cost might also include such other costs as legal and filing fees to secure the patent. Holders of patents often need to defend a patent in court against infringement. Any attorney fees and other costs of successfully defending a patent are added to the patent account. When a patent is developed internally, the research and development costs of doing so are expensed as incurred. We discuss research and development in more detail in a later section. We capitalize legal and filing fees to secure the patent, even if internally developed.

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Examples of what constitutes a manner of manufacture are textile machines, power plants, agricultural implements, domestic appliances, synthetic products, foodstuffs, dyes, chemicals, toilet preparations, processes and devices for making the same, and an agricultural process, such as the rotation of crops or horticulture process, such as the rotation of crops or horticultural process, such as treatment of plants or flowers. As against the disadvantages associated with the working of an unpatented invention either secretly or openly, or with the mere publication of the invention for free use by the public, the method of exploiting the invention by patenting it, has the following distinct advantages:o o o o

A patentees right to the exclusive use of his invention would not be prejudiced by the fact that his invention is made known to others. The said exclusive right could be enforced legally. The protection enjoyed under the patents would enable the patentee to raise capital for working the invention on a commercial scale. If the patentee were not himself in a position to work the invention commercially, he would be able to make a profitable use of the invention by selling his patent, or by granting licenses to others permitting the use of his invention. Even where the inventor does not desire to earn profits by the use of his invention, a patent would enable him grant licenses judiciously, so as to secure on the one hand, sufficient inducement to manufacturers to take up the working of the invention, and on the other hand, to confer the benefit of his invention on the largest possible section of the public. A patent would enable the invention to establish an official record of his inventor ship.

Hence, for the standpoint of the inventor as well as of the public it is distinctly advantageous to adapt a policy of protecting inventions by patents, instead of working them in secrecy, or working them openly or broadcasting them without protection. Patentable Inventions In Pakistan In order to be patentable an invention should have the following characteristics:(i) The invention is new. (ii) It involves an inventive step. (iii) It is capable of industrial application. (iv) It should not be contrary to law or morality.

COPYRIGHTS
A copyright is an exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph, or book. Copyrights are protected by law and give the creator the exclusive right to reproduce and sell the artistic or published work for the life of the creator plus 70 years. Accounting for the costs of copyrights is virtually identical to that of patents. There is some wiggle room within copyright law under fair use laws. For example, fair use laws give the right to people that purchased the book to loan it to their friends or sell

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it to someone else, even though they do not have the full copyright to reproduce the works that the publisher and author have. How far fair use laws actually go and exactly what rights the give to the consumer is a hotly contested and still evolving legal issue. Copyrights Advantages Original works of authorship that are fixed in a tangible form of expression. The fixation need not be directly perceptible so long as it may be communicated with the aid of a machine or device. Copyrightable works include the following categories: 1. 2. 3. 4. 5. 6. 7. literary works; musical works, including any accompanying words dramatic works, including any accompanying music pictorial, graphic, and sculptural works\ motion pictures and other audiovisual works sound recordings architectural works

Copyrights Disadvantages These categories should be viewed broadly. For example, computer programs and most compilations may be registered as literary works. Several categories of material are generally not eligible for copyrights protection. These include among others:

Works that have not been fixed in a tangible form of Ideas, procedures, methods, systems, processes, concepts, principles, discoveries, or devices, as distinguished from a description, explanation, or illustration Works consisting entirely of information that is common property and containing no original authorship (for example: standard calendars, height and weight charts, tape measures and rulers, and lists or tables taken from public documents or other common sources)

TRADEMARKS
A trademark, also called trade name, is an exclusive right to display a word, a slogan, a symbol, or an emblem that distinctively identifies a company, a product, or a service. The trademark can be registered with the Patent Office which protects the trademark from use by others for a period of 10 years. The registration can be renewed for an indefinite number of 10-year periods, so a trademark is an example of an intangible asset whose useful life could be indefinite.

A trademark or trade name can be very valuable. The Coca-Cola trademark mentioned previously is a good example. Note that the cost of the trademark reported in the balance sheet is far less than the estimate of its worth to the company. The Coca-Cola

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Company's 2001 balance sheet disclosed goodwill and other intangibles at a cost of only $2.6 billion. Pepsi to try impersonate or scrape the goodwill associate with that name. You can obtain a trademark of a name phrase or logo informally, but larger organizations always spend the time and money to formally register their names in case of any lawsuits

FRANCHISES
A franchise is a contractual arrangement under which the franchisor grants the franchisee the exclusive right to use the franchisors trademark or trade name within a geographical area, usually for a specified period of time. Many popular retail businesses such as fast food outlets, automobile dealerships, and motels are franchises. For example, the last time you ordered a hamburger at McDonalds; you were probably dealing with a franchise. The owner of that McDonald's outlet paid McDonald's Corporation a fee in exchange for the exclusive right to use the McDonald's name and to sell its products within a specified geographical area. In addition, many franchisors provide other benefits to the franchisee, such as participating in the construction of the retail outlet, training of employees, and national advertising. Payments to the franchisor usually include an initial payment plus periodic payments over the life of the franchise agreement. The franchisee capitalizes as an intangible asset, franchise, the initial franchise fee plus any legal costs associated with the contract agreement. The asset is then amortized over the life of the franchise agreement. The periodic payments usually relate to services provided by the franchisor on a continuing basis and are expensed as incurred. A franchise is a right granted to an individual or group to market a company's goods or services within a certain territory or location. Some examples of today's popular franchises are McDonald's, Subway, Domino's Pizza, and the UPS Store. There are many different types of franchises. Many people associate only fast food businesses with franchising. In fact, there are over 120 different types of franchise businesses available today, including automotive, cleaning & maintenance, health & fitness, financial services, and pet-related franchises, just to name a few.

GOODWILL
Goodwill is a unique intangible asset in that its cost cant be directly associated with any specifically identifiable right and it is not separable from the company itself. It represents the unique value of a company as a whole over and above all identifiable tangible and intangible assets. Goodwill can emerge from a companys clientele and reputation, its trained employees and management team, its favorable business location, and any other unique features of the company that cant be associated with a specific asset.

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Because goodwill cant be separated from a company, its not possible for a buyer to acquire it without also acquiring the whole company or a substantial portion of it. Goodwill will appear as an asset in a balance sheet only when it was paid for in connection with the acquisition of another company. In that case, the capitalized cost of goodwill equals the purchase price of the company less the fair value of the net assets acquired. The fair value of the net assets equals the fair value of all identifiable tangible and intangible assets less the market value of any liabilities of the selling company assumed by the buyer. Goodwill is a residual asset; its the amount left after other assets are identified and valued. Most business owners view goodwill as good service, products and reputation. One dictionary defines Goodwill as, "A desire for the well-being of others; the pleasant feeling or relationship between a business and its customers." Some Examples of Goodwill Items

Management Supplier List Reputation Copyrights Distributorships Franchises Trademarks Location Name Recognition