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Chapter 12: Question 8 (page 637)

Columbia Sportswear Company acquired a trademark that is helpful in distinguishing one of its new products. The trademark is renewable every 10 years at minimal cost. All evidence indicates that this trademarked product will generate cash flows for an indefinite period of time. How should this trademark be amortized?

Short Answer

Expert verified

This trademark has an infinite life span (renewable every 10 years at minimal cost); it should not be amortized.

Step by step solution

01

Definition of Trademark

A trademark is a symbol that distinguishes one company's goods or services from those of other companies. Intellectual property rights safeguard trademarks. Also, all evidence indicates that this trademarked product will generate cash flows for an indefinite period.

02

How Trademark is amortized

Trademarks are not amortized since they are thought to have an infinite life, implying that a trademark's value may be maintained indefinitely. A company's trademark value, on the other hand, must be reevaluated every year.

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