Licenses

Code: 1235
👁 Views: 100

Account Information

Financial Statement Statement of Financial Position
Normal Balance Debit

Definition

Cost of licenses and operational franchises granted to the company

Common Journal Entries

Purchase operating license

Dr. Licenses
Cr. Bank Account

Amortize license

Dr. Amortization Expense
Cr. Accumulated Amortization

Renew annual license

Dr. Licenses
Cr. Cash in Hand

Cancel and write off license

Dr. Write-off Expense
Cr. Licenses

Purchase operating license

Dr. Licenses
Cr. Bank Account

Amortize license

Dr. Amortization Expense
Cr. Accumulated Amortization

Renew annual license

Dr. Licenses
Cr. Cash in Hand

Cancel and write off license

Dr. Write-off Expense
Cr. Licenses

📐 IFRS vs US GAAP Accounting Treatment

IFRS IAS 38 Intangible Assets
US GAAP ASC 350 Intangibles - Goodwill and Other

❓ Frequently Asked Questions

Q: How are licenses amortized?

A: Amortized over their legal term (e.g., a 5-year operating license) using the straight-line method, with no residual value.

Q: Does the treatment of a multi-year prepaid license differ from an annual license?

A: A multi-year license is recorded as an intangible asset and amortized annually. An annual license is expensed in the year of payment (if the term is only one year).