How to calculate annual copyright depreciation

0


Companies must follow accounting rules for valuing assets on their balance sheets. With intangible assets such as copyrights, the depreciation of the asset’s value over time aims to accurately reflect the steady decrease in its value over time. Although the method of calculating copyright depreciation is straightforward, there are some tricky aspects that you should be aware of.

Copyright, legal life and useful life
Copyright provides legal protection to authors for a period of time. In general, copyright lasts for the life of the author plus 70 years. If the work is produced anonymously or under a pseudonym, the period extends over 95 years after the publication of the work or 120 years from the creation of the work, whichever is shorter. of them.

However, for accounting purposes, a copyright will not necessarily have a value for the entire duration of legal protection. Only rare works become classics and retain long-term value, and most works see their value decline rapidly after only a few years. Essentially, determining what is called useful life involves determining how long a given copyright will generate substantial income for its owner.

Depreciation calculation
Once you’ve decided on the useful life of copyright, the only other thing you need to know to write off copyright is its value. For copyright that a business has purchased, the book value will usually be its acquisition cost. If the company has developed the copyrighted work, it will assess the costs involved in producing the work.

Most copyright write-offs are done on a straight-line basis, and therefore to determine the amount of depreciation in any given year, divide the value of copyright by its useful life. For example, if a copyright is worth $ 100,000 and has a useful life of 10 years, you will amortize $ 10,000 of its value each year. At the end of the term, the book value will be zero, reflecting the expectation that copyright will no longer have the capacity to generate income.

Accounting for intangible assets such as copyright and other intellectual property can seem confusing. However, by applying normal accounting standards, you can determine the appropriate way to manage copyright in your financial statements.

This article is part of The Motley Fool Knowledge Center, which has been created based on wisdom collected by a fantastic community of investors. We would love to hear your questions, thoughts and opinions on the Knowledge Center in general or on this page in particular. Your contribution will help us help the world invest, better! Write to us at knowledge [email protected]. Thank you – and crazy!


Share.

Comments are closed.