Intangible Asset Amortization: Impact on a Firm's Performance

The Impact of Amortizing Intangible Assets over an Extended Period

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Question

What impact will the amortization of an intangible asset over a longer than appropriate period have on a firm?

Answers

A. It will result in higher than otherwise sales revenues.

B. None of these answers.

C. All of these answers.

D. It will reduce a firm's current income tax liability.

E. It will improve reported earnings.

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Explanations

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A. B. C. D. E.

Earnings, not revenues will be improved because amortizing an intangible asset over a longer than appropriate period reduces the annual amortization expense; this improves pre-tax and after-tax profits.

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