Great Performance !

We add to the asset account any amounts that we pay to defend our interests, such as paying a lawyer to sue a company that uses a name that is too similar to ours. If we were to purchase
the name from another company, we can record as the asset any amounts we paid to acquire the name. So if we can convince Coca-Cola to sell us the name for $1 billion, that is the amount we would record as an intangible asset (even though Coke’s accounting records say that the carrying value of the asset is $1,000).

If this were a fixed asset (for example, plant, property, or equipment), we would depreciate the asset. We don’t depreciate intangible assets; instead, we use a process called amortization. Functionally, amortization is very similar to depreciation. Since intangible assets are rights, often there are legal limits on how long we possess the rights. That’s why we say that the amortization period for intangible assets is the shorter of:

• The legal life
• The useful life
• Forty years