USA Capitalizing and Amortizing Intangible Assets

[rlee]

A company pays for a state franchise fee which last 10 years. The company also passes these franchise costs down to customer bills and fully recovers the cost after 4 years and stops collecting the pass down fee.

Should this company amortize the costs if they are passed down to the consumer?

If so what is the correct time frame for the amortization period?

What FASB statements speak to this issue?


Thanks you,

Lee

 

[Samir]

The asset is still on the books of the company regardless if the company passes the cost down to the consumer. So I would think they would amortize it regardless.

 

[Counterofbeans]

Should this company amortize the costs if they are passed down to the consumer?

Yes. The fact that they are considered in the sales price is irrelevant.

If so what is the correct time frame for the amortization period?

10 years, as that's the life of the state franchise fee

What FASB statements speak to this issue?

Probably come closest with ASC 350-30-35-3