The word ‘Copyright’ is a word that is common in the aspect of writing and content productions. It is notable for its usage in legal claims of certain content. It is also used to discourage replication or usage of the content without permission from the rightful owner.
However, copyright in accounting can be slightly different, according to CPA Tulsa. Conventionally, copyright is the legal right that equips you with the ability to oversee content publication. It is a power by law to decide who may publish, use, and copy any content and media content.
In accounting, copyrights are the legal way of protecting future revenue earning assets. They are also the intangible assets reported on a company’s balance sheet alongside other assets.
What are the Examples of Copyright in Accounting?
Copyrights are intangible assets amortized over some time. They are similar to trademarks and patents, and the period of amortization is known as useful life.
The cost of the intangible assets is distributed evenly throughout the useful life by the amortization process. Also, each expense must align with the revenue they generalize at the end of each period.
Significant examples of copyrights in accounting are trademarks, patents, and financial assets. Account receivable, stocks, and bonds are also examples of items recorded as copyrights.
However, copyrights and patents are known to be examples of intangible assets with a definite useful life. The following are a brief explanation of a few intangible assets;
1. Identifiable Intangible Assets
Any assets that can be separated from the company’s assets are known as identifiable intangible assets in a company. They can also be listed for selling by the company. Examples of such assets are patents, copyrights, trademarks, and other intellectual properties.
Likewise, computer software and other computer programs aside from hardware are categorized as identifiable intangible assets.
2. Unidentifiable Intangible Assets
Assets that cannot be physically separated from the company’s assets are known as unidentifiable intangible assets. Goodwill generated externally as a result of a merger or acquisition of another company is an excellent example of such.
The branding and reputation of a company can also be said to be unidentifiable intangible assets. Other assets such as logos and trademarks can be sold, but it is impossible to separate a company from its reputation.
However, the difference between the identifiable and unidentifiable intangible assets is their amortization. The intangible assets are amortized in consideration of their useful life. Unidentifiable intangible assets on their own cannot be amortized.
3. Patent
This is a legal license given to someone to make use of or sell a particular invention. The three types of patents are the utility patent, a design patent, and the plant patent. A patent is an intangible asset with a limited useful life of 20 years. It is listed on a company’s balance sheet as an intangible asset.
4. Franchises And Licenses
It is a legal entitlement given to a company to sell a product or service that belongs to another company. It is a license that grants you the right to use someone else’s intellectual property. It also gives the right to make use of the name and brand of an existing company. The franchise is known to be the company offered the right while the franchisor is giving the right.
What Does Amortizing A Copyright Means?
To every copyright, there is a useful life. It is the time business copyright can provide its revenue. The value of copyright is expected to experience a decrease. Therefore, it has become necessary for intangible assets like copyright to be amortized.
Amortization calculates the total copyright expense at the end of useful life and allocates each expense evenly to each year. At the end of each year, the expense is listed as the amortization amount subtracted from the copyright value. The method of amortizing copyright in accounting is known as the straight-line method.
Conclusion
Copyright is an intellectual property right a creator of content or unique work holds. It can be used in any industry where ideas are created by people to enhance productivity. However, copyright in accounting is known to be an intangible asset of a company.
Intangible assets can be classified into identifiable intangible assets and unidentifiable intangible assets. They are recorded in the balance sheet of the company at the end of the year. Some significant examples of intangible assets are copyrights, patents, trademarks, and some other financial assets.