How to Calculate Impairment of Copyrights

By John Cromwell

Impairment is an accounting method for valuing a copyright on the owner's financial statements. Specifically, impairment decreases the stated value of the copyright to reflect the current market value. Under Generally Accepted Accounting Principles (GAAP), copyrights are considered to be an "intangible asset," that is, a long-term resource that has no specific physical form. The method of calculation of impairment of intangible assets is defined in Financial Accounting Standards Board (FASB) Statement 142.

Impairment is an accounting method for valuing a copyright on the owner's financial statements. Specifically, impairment decreases the stated value of the copyright to reflect the current market value. Under Generally Accepted Accounting Principles (GAAP), copyrights are considered to be an "intangible asset," that is, a long-term resource that has no specific physical form. The method of calculation of impairment of intangible assets is defined in Financial Accounting Standards Board (FASB) Statement 142.

Step 1

Determine the useful life of the copyright. This is the period of time during which the underlying original work can contribute directly or indirectly to a business’s income. The useful life of a copyright is based on several factors, such as what the copyright material is used for and the possibility of the copyrighted material becoming obsolete. The maximum length of the useful life of a copyright is defined by copyright law. Works created after January 1, 1978 automatically receive legal copyright protection for the duration of the author's life plus 50 years. Works drafted for hire are protected for 75 years from the point of publication or 100 years from when the work was created, whichever is shorter.

Protect against infringement by registering a copyright. Get Started Now

Step 2

Assess the asset’s current carrying amount. For a copyright to be impaired, it must have a pre-existing value on the owner’s books. To determine the current carrying amount, take the original value of the copyright and divide it by the asset’s useful life. Multiply the result by the number of years you have held the asset and subtract that amount from the copyright’s original value. What remains is the current carrying amount.

Step 3

Determine the copyright’s fair value. The fair value of the asset is what price a buyer would pay for the copyright, assuming that the buyer is a third party that knows all the relevant facts about the copyright, and neither party is forced to enter into the transaction.

Step 4

Subtract the fair market value of the copyright from its current carrying amount. The result is the impairment loss on the copyright.

Protect against infringement by registering a copyright. Get Started Now
Copyright Rules & Time Limits

References

Related articles

How to Write a Copyright Statement

Copyright protects the economic value of creative works by ensuring that only the person who created it can reproduce or sell it for many years. A visible copyright notice tells viewers that the work is protected by copyright and makes enforcement of copyrights easier, although you cannot bring enforcement litigation without also registering your copyright with the U.S. Copyright Office. Write a clear copyright statement for placement on your creative works to tell the world that you created it and will protect your copyright.

How to Copyright Your Comic Creations

Comic creations feature an abundance of copyrightable matter, including detailed art work, unique graphics and creative text. You can register your original creative work as a literary work or a visual art work. Complete the copyright registration application online or on paper. For paper applications, use form TX for literary works or form VA for visual art. You must include at least one copy of your comic creation with your electronic or paper application.

Can I Record Someone Else's Song and Change the Words in Parody Law?

United States copyright law grants legal protection to various creative works, including songs or lyrics. Under The Copyright Act of 1976, copyright holders have exclusive rights to reproduce their creations for a specific length of time. Those exclusive rights are limited by the doctrine of “fair use,” which allows for others to reproduce a work in whole or in part for use in a parody without the copyright holder’s permission, provided the parody meets certain criteria.

Related articles

How Is Copyright Intangible?

A person may own three kinds of property: real property, such as land or buildings; tangible property, including ...

FASB Rules for Trademark Costs

Trademarks are federal grants that allow businesses to exclusively use specific words, names, symbols and logos. Since ...

Divorce & Copyright Protected Property

Copyright-protected property can be a valuable economic asset that must be considered in the financial settlement of a ...

Fair Use Copyright Laws for Education

Copyright laws restrict individuals from using, copying or otherwise reproducing copyrighted materials without ...

Browse by category
Ready to Begin? GET STARTED