Intangible assets are recorded in the statement of financial position at their initial cost or fair value, if applicable. Amortization of intangible assets is recorded as an expense on the income statement and reduces the carrying value of the intangible asset on the balance sheet.
To record the amortization of intangible assets in the statement of financial position, the following steps are typically followed:
1. Calculate the annual amortization expense for each intangible asset. This is typically done by dividing the initial cost of the intangible asset by its useful life.
2. Record the amortization expense on the income statement as a separate line item under operating expenses.
3. Adjust the carrying value of the intangible asset on the balance sheet by subtracting the amount of amortization expense for the period.
By following these steps, the statement of financial position will accurately reflect the carrying value of intangible assets after accounting for their amortization.
How do you record Intangible assets and amortization in the statement of financial position
1 answer