A copyright is a type of intangible asset that provides the holder of the copyright with an exclusive right related to either the use or production of a product. Generally accepted accounting principles allow you to amortize the value of the copyright over its expected useful life. In most cases, the legal life of a copyright is substantially longer than the actual useful life of the copyright. You may calculate the annual amortization of a specific copyright.
Determine the value of the copyright. As an intangible asset, the specific value of the copyright will depend on the expected value of the copyright over its expected life. An accountant or copyright attorney can assist you with establishing an appropriate value for the copyright. For example, assume the value of the copyright is $100,000.
Determine the costs directly associated with obtaining the copyright. These costs include attorney fees, filing fees or the costs of directly purchasing a copyright from another person or business. For this example, assume the costs of the copyright is $10,000.
Subtract the costs of the copyright from the value of the copyright. Continuing the same example, $100,000 - $10,000 = $90,000. This is the total amount you should amortize for the copyright.
Determine the expected life of the copyright. Even though the legal life of a copyright is 70 years plus the life of the creator, the copyright will have a shorter expected life for accounting purposes. The expected life is the actual useful life of the copyright. A copyright attorney or accountant can help you determine the expected life of the copyright. For this example, assume the expected life of the copyright is 10 years.
Divide the amortized value of the copyright by the expected life. Continuing the same example, $90,000 / 10 = $9,000. This figure equals the annual amortization of the copyright.
- "Principles of Accounting"; Belverd Needles et al; 2010
- Principles of Accounting: Chapter 11 Advanced PP&E; Issues / Natural Resources / Intangibles
- Hemera Technologies/AbleStock.com/Getty Images