Accounting for trademarks

2. Acquired trademarks

Accounting for purchased trademarks may be less complicated. As a trademark is bought in the open market, the agreement price is usually considered to be the fair value of the acquired trademark.

For instance, Company ABC acquired a trademark for $10,000.

1) The prepayment is made for the rights on the new trademark:

Account Titles

Debit

Credit

Advances (or Accounts Payable)

$10,000

 

     Cash

 

$10,000

2) The counterparty had provided the license agreement:

Account Titles

Debit

Credit

Construction in Progress

$10,000

 

     Advances (or Accounts Payable)

 

$10,000

3) The company recognized the trademark acquired:

Account Titles

Debit

Credit

Intangible Assets

$10,000

 

     Construction in Progress

 

$10,000

Trademarks may be acquired as part of a business combination in which case a part of the purchase price is allocated to the cost of the acquired trademarks.  Such cost usually equals the fair market value of the acquired trademarks.

Not a member?
See why people join our
online accounting course:
Lecture Contents:
Free Study Notes
Download free accounting study notes by signing up for our free newsletter (example):
First Name:
E-mail:
We never share or sell your e-mail to third parties.