Outline the accounting for identifiable intangible assets

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Reference no: EM133083303

Recognition of patents in a business acquisition

In their article 'Motorola deal offers Google tax, patent benefits' Browning and Byrnes (2011) noted the following:

Google Inc's blockbuster acquisition of Motorola Mobility Holdings Inc will bring an unusual stable of tax and accounting benefits to the search-engine giant. already one of Corporate America's most savvy users of such perks.

By agreeing on August 15 to pay $12.5 billion in cash for struggling Motorola Mobility's vast portfolio of 17000 patents and 7500 pending patent applications on top of its handset business and television set-top boxes. Google is building a defensive bulwark for its Android phone software. already available on Motorola phones among others.

The acquisition further highlights the lack of transparency in accounting rules on how intangibles such as patents, brand names and the like am valued and their worth to investors.

Google has yet to announce the value it will give Motorola's intangibles, but experts agree it will be far more than what is currently on the cell phone maker's books. In a recent filing, Motorola Mobility reported an amortized value of $176 million for its intangible assets as of July 2. 2011.

Valuing patents may he more an art than a science.

Kevin Smithen, an analyst at Macquarie Capital, an investment firm in New York, estimated the $12.5 billion purchase price represented a $4.5 billion value for Motorola Mobility's portfolio. $3.2 billion in cash the company holds, a $3 billion handset and TV set-top business. and $1.7 billion in net operating loss tax benefits it has been unable to use.

Willens [a New York accounting and tax expend estimated the $12.5 billion deal will include $3 billion in goodwill, or the value Google expects to generate from Motorola Mobility's brand. know-how and other intangibles, not including the patents.

Required
A. Outline the accounting for identifiable intangible assets at acquisition date when there is a business combination.
B. Explain the difference in the accounting for patents by Google in comparison to that of Motorola.

Reference no: EM133083303

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