Q&A for How to Calculate Amortization on Patents

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What if there is more legal fees incurred before end of patent life?

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Legal fees incurred after you have calculated your patent cost and started an amortization schedule can be capitalized. This means that they are added to the patent account and amortized over time in the same way.

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Question

Can I start to amortize patent costs during the application process perhaps for a 36 month period while I wait to see if the patent is approved?

Community Answer

You cannot amortize a patent that you do not yet hold. However, once you get the patent, you can amortize the expenses you are currently paying to get it approved.

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What is a patent originally has a legal life of 10 years, but after 2 years it's determined it only had a legal life of 6 years?

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If the legal life runs out before your patent is fully amortized, you can record a derecognition of the patent by debiting the accumulated amortization account and crediting the patent account. The unamortized balance must then be recorded as a loss.

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What is the entry for depreciation of intangible assets?

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Intangible assets are not depreciated. Rather, they can be amortized (to spread the cost out over several years) or impaired (when a decrease in the value of the intangible asset must be recognized).

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Question

Must I include R&D costs in patent amortization or is this optional?

Community Answer

Amortization is always optional, so you can choose what not to include in your original patent cost.

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