A REPORT ON NATURAL RESOURCES, INTANGIBLE ASSETS & LONG TERM INVESTMENT

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A REPORT ON

NATURAL RESOURCES,

INTANGIBLE ASSETS & LONG TERM INVESTMENT

Discussion Area:

DESCRIPTION &WEAR AND TEAR OFNATURAL RESOURCES & INTANGIBLE

ASSETS AND CLASSIFIED DESCRIPTION

OF LONG TERM INVESTMENT

Department of Finance

Faculty of Business Studies

University of Dhaka

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SUBMITTED TO:

NUSRAT KHANLECTURER


University of Dhaka

SUBMITTED BY:

Group no.10, Section: A

Batch: 18th



University of Dhaka

Date of submission: April23, 2012

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University of Dhaka.

Subject: Submission of report.

Dear Mam,This is a report on Natural resources, Intangible assets & Long tern

Investment for fulfilling course F-103 of BBA program and it is our

pleasure to present such before you.

We have prepared this report based on the data gathered from Various

books of accounting & from Internet . For the preparation of the report,

we have focused on the information found to be reliable and valid.

We truly appreciate our topic to be an important and significant one to

enhance knowledge without which we would be surely in vague position.

We deeply regret for any inconvenience located in this report and we will

always be available for any clarification required.

Sincerely yours,All members of Group 16, Section: A

B.B.A. 18th Batch



University of Dhaka.

Acknowledgement

This is high time we conveyed our deepest gratitude and sincere

submission to the Almighty ALLAH for giving us the opportunity to

accomplish such an enjoyable task of preparing this report in time.

We express our thanks to our dear course teacher Nusrat Khan for

assigning us a report about Natural resources,Intangible assets &Longterm Investment. In this regard, we would also like to thank ourselves for

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our good teamwork and successful team spirit. Without co-operation and

the support from each other, it would not be possible to prepare a

resourceful report.

The presentation of this report is of a great expectation in our BBA

program and we are quite happy to submit it duly applying that we think

should have to be included. Theoretical knowledge should be valued

when it is successfully applied in practical decision-making scenario.

So lastly we would again like to express our heartfelt thanks to our course

teacher for providing the theoretical knowledge and valuable guidelines

related to exchange of financial assets.

All members of Group 10, Section: A,

Department of Finance (18th Batch).

Executive summary

Dhaka Stock Exchange Limited is the first ever secondary share

market in Bangladesh. It was incorporated on 28.04.1954 as public

limited company. In 1956, DSE started trading securities after

receiving commencement of operation. At present, DSE has an

automated trading system. In this report, we have tried our best to

show the trading mechanism of securities in DSE.

The trading of securities can be viewed from two perspectives-

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1. Issuers viewpoint

2. Investors viewpoint

An issuer company can enter into the share market through IPO and

direct listing.

One can be a member of this organization and can participate intransactions only by purchasing share. Solvency, Adequate and

proper knowledge etc. are some of the pre-requisites of investing in

Dhaka Stock Exchange. To participate in the transaction of share, an

investor has to follow some steps like- opening B/O account,

depositing security money etc.

Table of contents

Sl. No. Topic Page. No.

01. Natural Resources 09

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Microsofts patents, McDonalds Franchise, Apples trade name iPod

Amortization: The allocation of the cost of an intangible asset to expense over itsuseful life in a systematic and rational manner. Generally accepted accounting

principles require that Amortization period for an intangible asset be 40 years or less.Only Straight line method can be used for amortizing intangible assets unless the

reporting company can demonstrate that another method is more appropriate.Patents: The federal government grants patents to encourage the invention of newmachines, mechanical devices and production processes. A patent gives its owner theexclusive right to manufacture and sell a patented machine or devices or to use a

process, for 17 years.

When patent rights are purchased, the cost of acquiring the rights is debited to

an account called patent

If the owner engages in lawsuits to defend a patent, the cost of the lawsuits

should be debited to the patent account.

The cost of research and development leading to a new patent are not debitedto an asset account.

For example if a patent that cost $25000 has an estimated useful life of 10 years,the owner makes the following adjusting entries at the end of those years to writeoff ONE tenth of its cost:

The entrys debit cause $2500 patent costs to appear on the income statement as oneof the costs of the product manufactured and sold under the protection of the patent.

Note that we have followed the convention of crediting the patent account rather thana contra account.Copyrights: A copyright is granted by the federal government or by internationalagreement & in most cases, a copyright gives its owner the exclusive right to publishand sell a musical, literary or artistic work during the life of the composer, author, orartist and for 50 years thereafter.Most copyrights have value for a much shorter time, and there cost should beamortized over the shorter period. Often, the only identifiable cost of a copyright isthe fee paid to the copyright office.If this fee if not material, it may be charged directly to an expense account. Otherwisethe copyright cost should be capitalized (record as a capital expenditure), and periodic

amortization of a copyright should be debited to an account called Amortizationexpense, copyrights.

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Dec 31 Amortization Expense,patents

Patent..To write off patent costs over the expected10 year life.

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Leaseholds: Property is rented under a contract called a lease. The person orcompany that owns the property and grants the lease is called lessor. The person orcompany that secures the rights to possess and use the property is called the lessee.The rights granted to the lessee by the lessor under the lease are called leaseholds. ALeasehold is an intangible asset for the lessee.

Some leases require no advance payment from the lease but do require monthly rentpayments. In such cases, a Leasehold account is not needed and the monthlypayments are debited to a rent expense account. Sometimes a long-term leaserequires the lessee to pay the final years rent in advance when the lease is signed. Ifso, the lessee records the advance payment with a debit to its leasehold asset account.Because the usefulness of the advance payment is not consumed until the final year isreached, the leasehold account balance remains intact until that year. At that time, the

balance is transferred to rent expense.Leasehold improvements: Long-term leases of an require the lessee to pay for anyalterations or improvements to the leased property, such as new partitions and storefronts. Normally, the costs of these leasehold improvements are debited to an account

called leasehold improvements. Also, since the improvements become part of theproperty and revert to the lessor at the end of the lease, the lessee must amortize thecost of the improvements over the life of the lease or the life of the improvements,Whichever is shorter. The amortization entry commonly debits rent expense andcredits leasehold improvements.Goodwill: the term goodwill has a special meaning in accounting. In theory a

business has an intangible assets called goodwill when its rate of expected futureearning is greater than the rate of earning normally realized in its industry. Aboveaverage earnings and the existence of theoretical goodwill may be demonstrated withthe following information about companies A & B, both of which are in the sameindustry.

Net asset (other than Goodwill)

Normal rate of return in the industry.Normal return on netasset..Expected netincome.Expected earnings aboveaverage.

Company A$100000

10%

Company B$100000

10%

$10000$10000

$10000$15000

0 $5000

Company B is expected to have an above average earnings rate compare to itsindustry and, therefore, is said to have goodwill. this goodwill may be the result ofexcellent customer relations, the location of the business, the quality and uniquenessof its products, monopolistic market advantages, a superior management andworkforce, or a combination of these and other factors. Consequently, a potentialinvestor would be willing to pay more for company B than the company A. Thus,goodwill is the theoretically an asset that has value.

Normally, goodwill is purchased only when an entire business operation is acquired.To keep financial statement information from being too subjective, accountants have

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agreed that goodwill should not be recorded unless it is purchased. The amount ofgoodwill is measured by subtracting the fair market value of the purchased businessmade assets(excluding goodwill) from the purchased price.Like other intangible assets goodwill must be amortized on a straight Line Basis overits estimated useful life. However, estimating the useful life of goodwill is verydifficult and highly arbitrary in most situations. As a result, It is expected to find

companies reporting amortization expense for goodwill based on an estimated usefullife of five years upward, but not more than 40 years.Trade Marks & trade Names: Companies often adopt unique symbols or selectunique names that they use in marketing their product. Sometimes, the ownership andexclusive right to use such a trade mark or trade name can be established simply bydemonstrating that one company has used the trademark or trade name before other

business. However, Ownership generally can be established more definitely byregistering the trade mark Or trade name. The cost of developing, maintaining orenhancing the value of a trade mark or trade name, perhaps through advertising,should be charged to expense in the period or periods incurred. However, if atrademark or trade name is purchased, the purchased cost should be debited to asset

account and amort5ized overtime.

Investments in Debt Securities Held to Maturity

Debt securities held to maturity may be short-term investments or long-terminvestments. In either case the owner must have the positive intent and ability to holdthe securites until they mature. At the time of purchase these investments are recordedat cost. Then, interest revenue is recorded as it accrues.

Illustration 1.1 Accounting for Long-term Investments in securities

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The entry to record the fair value of the investments is:Dec 31 Long term invetments, Fair value adj...............

Unrealized holding gain(loss)................To record change in fair value of securities available

for sale

3000030000

The equity method of accounting for common stock InvestmentsIf a common stock investor has significant influence over the investee, the equitymethod of accounting for the investment must be used. When the stock is acquired,the investor records the purchase at cost. For example on January 1,19X1, Gordoncompany purchased 3000 Shares of JWM,inc., common stock for a total cost of$70650. This entry records the purchase on Gordon's books:Jan 1 Invetment in JWM common stock...............

Cash................Purchased 3000 shares

7065070650

Under the equity method, the earnings of the investee corporation not only increasethe invesee's net assets but also increase the investor's equity claims against theinvestee's asset. Therefore, when the closes its books and reports the amount of itsearnings, the investor takes up its shares of those earnings in its investment account.For example, assume that JWM reported net income of $20000 for 19X1. Gordon'sentry to record its 30% share of these earnings is:Jan 1 Invetment in JWM common stock...............

Earnings from investment in JWM,inc.......

To record 30% equity in investee's earnings of $20000

60006000

The debit records the increase in gordon company's equity in JWM. The credit causes30% of JWM's net income to appear on Gordon company's income statement asearnings from the investment. As with any other revenue, Gordon closes the earningsto income summary.

Investments That require Consolidated Financial StatementsWhen a business operates as a parent company with subsidiaries, seperate accounting

records are maintained by each corporation. From a legal viewpoint, the parent andeach subsidiary are still seperate entities with all the rights, duties, and responsibilities

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Book ValueFair(market)

value

Candice corp. Bonds payable.................... $30000 $29050Index corp. Common stock,500 Shares....... $43000 $45500Total.................................................... $73000 $74550


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Documents

A REPORT ON NATURAL RESOURCES, INTANGIBLE ASSETS & LONG TERM INVESTMENT