Content
Patents allow inventors and their partners, who have exclusive rights, to manufacture and sell their invention. It should be new and useful. A patent is an intangible asset of a company, it has the same characteristics and properties as copyright, trademark, franchise, government license, natural resource, depreciable property or capital. A patent can only be licensed for a limited period of time. The cost of a patent depends on the duration of its validity, as well as the degree of usefulness in life. Patents are not granted for more than 40 years. To calculate the depreciation charge for a patent, you can use a simple formula, such as for other intangible assets. In this article, we will tell you how to calculate the cost of intangible assets and depreciation charges.
Steps
1 Find the original cost of the patent itself. In this example, the original patent value would be $ 100,000. The initial value of a patent depends on the type of invention for which the patent is granted (compared to other similar products invented earlier). 
2 You need to indicate the expiration date of the patent. For example, our patent is issued for 10 years. 
3 Divide the value of the original value of the patent by the number of years for which it is granted. The result is the amortization payout for the patent: 100,000/10 years = $ 10,000 per year.
Tips
- The cost of the patent is much higher than the original depreciation cost. There are also costs of applying for a patent, various legal costs, costs of testing an invention, and so on. Additional costs usually occur every 3.5, 7.5 and 11.5 years. They are required in order to extend the patent's shelf life. You also need to pay for a patent application. It all depends on the number of applications related to a particular invention. Usually it costs $ 400-1000 or more to apply. The application can be made with the help of an attorney or a special patent agent.
- You cannot depreciate a product that has a defined economic, cost-effective life. It is possible to assess the significance of an invention when applying for a patent renewal. If the assets do not lose their value, you will remain the owner of the patent for a certain amount of time. The unamortized value of intangible assets of indefinite duration will be credited to another account attributable to the ownership of the goods or equipment. An example of a non-depreciated asset of indefinite shelf life is a service or program for downloading digital music to a computer. As long as such a service is provided on mutually beneficial terms, it remains in your possession and the patent does not change.
