Question
Columbia sportswear company acquired a trademark that helpful in distinguishing one of it's new products. The trademark is renewable every 10 years at minimal costs. All evidence indicates that this trademarked product will general cash flow for an indefinite period of time. How should this trademark be amortized?
Answers
GPT-4o mini
The trademark acquired by Columbia Sportswear Company should be treated as an indefinite-lived intangible asset. Since the trademark is renewable every 10 years at minimal cost and all evidence indicates that it will generate cash flows indefinitely, it should not be amortized.
Instead of amortization, indefinite-lived intangible assets are tested for impairment at least annually. If the asset’s carrying value exceeds its fair value, an impairment loss must be recognized. Therefore, in the financial statements, the trademark will remain on the balance sheet at its original cost, subject to impairment testing as necessary, rather than being amortized over a specific period.
Instead of amortization, indefinite-lived intangible assets are tested for impairment at least annually. If the asset’s carrying value exceeds its fair value, an impairment loss must be recognized. Therefore, in the financial statements, the trademark will remain on the balance sheet at its original cost, subject to impairment testing as necessary, rather than being amortized over a specific period.