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Intermediate Accounting (Kieso)
Found in: Page 637

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Short Answer

Explain how losses on impaired intangible assets should be reported in income.

Impairment losses are normally included in the "Other costs and losses column of income" from continuing operations.

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Step by Step Solution

Loss on impaired intangible asset

When an intangible asset is regarded less value than what is reported on the balance sheet after amortization, it is said to be impaired.

How should it be reported?

It is reported in other costs and losses (column of income). Impairment losses (and the recovery of losses for assets to be disposed of) are similar to other operational expenditures.

As a result, profits (loss recoveries) on assets to be sold should be reported as income from ongoing activities.

Most popular questions for Business-studies Textbooks

Question: (Accounting for Research and Development Costs) Cuevas Co. is in the process of developing a revolutionary new product. A new division of the company was formed to develop, manufacture, and market this new product. As of year-end (December 31, 2017), the new product has not been manufactured for resale. However, a prototype unit was built and is in operation.

Throughout 2017, the new division incurred certain costs. These costs include design and engineering studies, prototype manufacturing costs, administrative expenses (including salaries of administrative personnel), and market research costs. In addition, approximately $900,000 in equipment (with an estimated useful life of 10 years) was purchased for use in developing and manufacturing the new product. Approximately $315,000 of this equipment was built specifically for the design development of the new product. The remaining $585,000 of equipment was used to manufacture the pre-production prototype and will be used to manufacture the new product once it is in commercial production.


  1. How are “research” and “development” defined in the authoritative literature (GAAP)?
  2. Briefly indicate the practical and conceptual reasons for the conclusion reached by the Financial Accounting Standards Board on accounting and reporting practices for research and development costs.
  3. In accordance with GAAP, how should the various costs of Cuevas described above be recorded on the financial statements for the year ended December 31, 2017?

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