ASC 350: Intangibles, Goodwill, and Other

Not everything a company owns can be seen or touched. A recognizable brand, patented technology, customer relationships, and the reputation that allows a business to earn more than the value of its individual assets all have economic value.

The challenge is determining when those values should appear on the balance sheet and when they should change over time.

The accounting objective is to faithfully represent intangible assets according to how their economic benefits are consumed. Some intangible assets lose value as time passes and are amortized. Others, such as certain trademarks or goodwill, are not presumed to diminish simply because time has passed. Instead, they remain on the balance sheet unless there is evidence that their value has declined.

Applying that principle requires judgment. Determining whether an intangible has a finite or indefinite life, identifying the appropriate unit for evaluating goodwill, and deciding when a decline in value has occurred often involve significant analysis, even though the underlying objective remains the same.

At this point, you understand the economic substance that ASC 350 is trying to capture. Everything that follows is simply the framework used to apply that principle in practice.