An initial licensing fee that allows the holder to use the name of another company for a defined period of time would be capitalized and subsequently amortized over the number of periods benefitted.

Question

Quizplus · Accepted Answer

This statement is accurate as per generally accepted accounting principles (GAAP). When a company pays for the right to use another company's name, trademark, or logo, it is considered an intangible asset and should be capitalized. The initial licensing fee should be recorded as a long-term asset and then amortized over the useful life or the defined period of time.

An Initial Licensing Fee That Allows the Holder to Use