ASC Research Case-Defensive Intangible Asset

a. How does the FASB ASC Glossary define a defensive intangible asset?
According to the FASB glossary: A Defensive Intangible Asset is an acquired intangible asset in a
situation in which an entity does not intend to actively use the asset but intends to hold (lock up) the
asset to prevent others from obtaining access to the asset.

ASC 350-30-25-5
Recognition
9 FASC A defensive intangible asset should be accounted for as a separate unit of accounting. It
should not be included as part of the cost of an entity's existing intangible asset(s) because the
defensive intangible asset is separately identifiable.
http://www.accountingweb.com/blogs/lindacavanaugh/eitf-08-7-accounting-defensive-
intangible-assets

b. According to ASC Topic 806 Business Combinations, what is the measurement principles
that an acquirer should follow in recording identifiable assets acquired in a business
combination?

Measuring the Fair Value of a Noncontrolling Interest in an Acquiree
FASC Updates 30-7 Paragraph 805-20-30-1 requires the acquirer to measure a noncontrolling
interest in the acquiree at its fair value at the acquisition date. An acquirer sometimes will be able to
measure the acquisition-date fair value of a noncontrolling interest on the basis of a quoted price in
an active market for the equity shares (that is, those not held by the acquirer). In other situations,
however, a quoted price in an active market for the equity shares will not be available. In those
situations, the acquirer would measure the fair value of the noncontrolling interest using another
valuation technique.
> Measurement Principle ASC 805-20-30-1
30-1 Measurement principle that an acquirer should follow in recording identifiable asset: The
acquirer shall measure the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at their acquisition-datefair values.
Retrieved: http://josefrashty.com/uploads/2/8/9/2/2892636/2011-03_def._rev._tcpaj.pdf
http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Content/Articles/AERS/Accounting-
Standards-Communications/us_assur_Business_Combinations_Roadmap1209.pdf
c. According to ASC Topic 820 Fair Value Measurement, what value premise (in-use or in-
exchange) should Ahorita assign to the Z-Tech trade name in its consolidated financial
statements?

35-10A A fair value measurement of a nonfinancial asset takes into account a market participants
ability to generate economic benefits by using the asset in its highest and best use (The asset is at
the current fair value of $2 million) or by selling it to another market participant that would use the
asset in its highest and best use. 35-10C Highest and best use is determined from the perspective
of market participants, even if the reporting entity intends a different use. However, a reporting entitys
current use of a nonfinancial asset is presumed to be its highest and best use unless market or other
factors suggest that a different use by market participants would maximize the value of the asset.
ASC 820-10-35-10.
Retrieved: https://asc.fasb.org/imageRoot/00/7534500.pdf

d. According to ASC Topic 350 General Intangibles Other than Goodwill, how should Ahorita
determine the estimated useful life of its defensive intangible asset?

ASC 350-30-35-A A defensive intangible asset shall be assigned a useful life that reflects the entity's
consumption of the expected benefits related to that asset. The benefit a reporting entity receives
from holding a defensive intangible asset is the direct and indirect cash flows resulting from the entity
preventing others from realizing any value from the intangible asset (defensively or otherwise). An
entity shall determine a defensive intangible asset's useful life, that is, the period over which an entity
consumes the expected benefits of the asset, by estimating the period over which the defensive
intangible asset will diminish in fair value. The period over which a defensive intangible asset
diminishes in fair value is a proxy for the period over which the reporting entity expects a defensive
intangible asset to contribute directly or indirectly to the future cash flows of the entity. 35-5B It would
be rare for a defensive intangible asset to have an indefinite life because the fair value of the
defensive intangible asset will generally diminish over time as a result of a lack of market exposure or
as a result of competitive or other factors. Additionally, if an acquired intangible asset meets the
definition of a defensive intangible asset, it shall not be considered immediately abandoned.

Retrieved:

http://www.deloitte.com/assets/DcomUnitedStates/Local%20Content/Articles/AERS/Accounting-
Standards-Communications/us_assur_Business_Combinations_Roadmap1209.pdf

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a. How does the FASB ASC Glossary define a defensive intangible asset?

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