When an intangible asset ceases to provide future service potential to an enterprise, its cost should be removed from the accounting records. In the case of intangible assets that are considered to have indeterminate useful lives, proper accounting requires amortization over a period not to exceed 40 years. The entry for amortization includes a debit to an expense account and a credit to the appropriate intangible asset account. If the entity can demonstrate that another method is more appropriate, its use is proper. The two principal kinds of patents are product patents, which cover actual physical products, and process patents, which relate to the process by which products are made.
Amortization is recorded over the legal life or useful life whichever is shorter.
Research and development costs related to the development of a product, process, or idea that is subsequently patented must be expensed as incurred. A copyright is a federally granted right that authors and other artists have in their creations. A copyright is granted for the life of the creator plus 50 years. During this time, the owner or heirs have the exclusive right to reproduce and sell an artistic or published work. Normally, the useful life of a copyright is less than its legal life, but, in any case, amortization should not exceed 40 years.