INTANGIBLE ASSETS

Intangible assets are those assets that provide an organization with future economic benefits but have no physical substance. Examples of intangible assets include patents, copyrights, and goodwill. This chapter discusses only those intangible assets acquired by a not-for-profit organization in a transaction or transactions that are not business combinations. Generally accepted accounting principles (GAAP) provides specific guidance about capitalizing costs of internally developed intangible assets. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to the cash flows of the organization. Under GAAP, impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. The chapter describes a two-step impairment test that is used to identify potential goodwill impairment and then measure the amount of a goodwill impairment loss to be recognized.