The Company Logo—an Asset or Expense? Essay

Words: 1393
Pages: 6

The Company Logo—an asset or expense?
As the title of this essay suggests, it must first be decided whether the company symbol or logo should be recognized as an asset or an expense. An asset is defined as something of value, such as cash, equipment, inventory, or buildings, while expense is defined as something that has a negative effect on the value of the practice, such as accounts payable. The simple question that needs to be answered is “Does the company logo contributes to or takes away from the value of the business”? Since the company has to pay for the consultant company, the logo could be considered an expense, however, the logo contribute to the revenue of the business in many ways like build the image of the company, establish
…show more content…
Besides, logo is a graphic mark used by the company to promote market recognition and represent the company’s brand thus it is non-monetary and have no physical substance. Thus, the logo satisfies the reorganization criteria of intangible asset. An intangible asset shall be recognized if it is probable that the expected future economic benefits derived from the asset will flow to the entity and the cost of the asset can be measured reliably. Nevertheless, an intangible asset cannot be recognized if the cost of the asset cannot be measured because AASB 38 requires initial measurement at cost. Real and Reel acquired the logo at a cost of $300,000 thus it shall be measured at purchase price. In addition, if intangible assets cannot be revalued because there is no active market for the asset, the asset shall be carried at its cost less any accumulated amortization and impairment losses. For an intangible asset with an indefinite useful life shall not be amortized. (AASB 1995) The company logo is considered to be indefinite asset because it stays with the company as long as the company continues to operating. Therefore, the logo shall be recognized as an intangible asset recorded at $300,000 and tested for impairment on an annual basis.

On the other hand, Real to Reel can also record the expenditure on the company’s logo as expense. This may be attributed to the consideration that