| Course | ACC-6030 Accounting Theory |
|---|---|
| Module | Module 10 |
| Paper type | Written Assignment 10: long-term investments and intangible assets |
| Length | About 721 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | M.S. in Management in Accounting |
| Updated | October 2026 |
Free sample paper for ACC 6030 Module 10
The Missing Assets: Intangibles, Goodwill and the Limits of the Balance Sheet
Student Name
M.S. in Management in Accounting, Thomas Edison State University
ACC-6030: Accounting Theory
Mentor Name
Month Day, Year
The Missing Assets: Intangibles, Goodwill and the Limits of the Balance Sheet
Introduction
Accounting developed in an economy of physical assets, where cost was a reasonable measure and assets could be counted. In knowledge-based companies, much of the value comes from research, brands, software and relationships, which accounting either does not record or records only when they are bought (Schroeder et al., 2011). This module's topics test whether accounting can measure such resources.
Internally Developed Intangibles
Under U.S. GAAP, research and development costs are expensed as incurred, with narrow exceptions for software. Brands, customer lists and know-how developed internally are not recognized as assets, while the same items acquired in a business combination are recognized at fair value. Two companies with identical resources can therefore report very different balance sheets depending on whether they built or bought them.
The rationale is uncertainty: future benefits from research are hard to identify and measure, and capitalization would invite optimistic estimates. Critics argue the cost is lost relevance. Lev and Zarowin (1999) documented a decline in the association between reported earnings, book values and share prices over several decades and attributed much of it to the growing importance of intangibles and the failure of accounting to capture them, proposing expanded capitalization and disclosure.
Goodwill: Amortize or Impair?
Goodwill arises only in acquisitions, as the excess of the price over the fair value of identifiable net assets. Since 2001, U.S. public companies have not amortized goodwill but have tested it for impairment at least annually. Supporters argued that impairment testing would give users more information about acquisitions than arbitrary amortization. Critics have since argued that impairment tests are costly, subjective and recognize losses too late. Li and Sloan (2017) found that, after the change, goodwill impairments became less timely and goodwill balances were inflated relative to underlying performance, consistent with managers using discretion to delay write-offs.
The FASB considered reintroducing amortization for public companies but removed the project from its agenda in 2022 without changing the rules, while private companies and not-for-profits may elect to amortize goodwill over up to ten years. The IASB also kept impairment-only accounting after its own review, choosing to improve disclosures about acquisitions instead.
A private acquirer can choose to expense goodwill over a decade or less and a listed one cannot, so two look-alike deals may now show very different costs.
Long-Term Investments
Investment accounting depends on intent and influence: debt securities at amortized cost or fair value, equity securities without significant influence at fair value through net income, investments with significant influence under the equity method and controlled subsidiaries consolidated. The models reflect the same tension as intangibles. Fair value for marketable securities is relevant and verifiable from markets, while the equity method relies on the investee's historical cost accounting, carrying forward the investee's own unrecorded intangibles.
Applying the Analysis: Raritan Medical Devices
Raritan Medical Devices, a composite maker of surgical stapling systems in Somerset, New Jersey, spends 14% of revenue on research, holds 120 patents and sells under a brand surgeons trust. None of the patents or brand value appears on its balance sheet, which shows book equity of $310 million against a market value of $2.1 billion. Last year Raritan bought a small robotics company for $180 million, recording $55 million of patents and technology and $95 million of goodwill. The acquired patents are amortized; Raritan's own, more valuable patents are invisible. A user comparing Raritan's return on assets with that of a company that grew through acquisitions would be misled by the different treatment of built and bought intangibles.
| Resource | Recognized? | Measurement |
|---|---|---|
| Internally developed patents and brand | No | Research and marketing expensed as incurred |
| Patents and technology acquired with the robotics company | Yes | Fair value at acquisition, amortized |
| Goodwill from the acquisition | Yes | Not amortized; tested for impairment annually |
| Investment in a 25% owned sensor startup | Yes | Equity method, at cost plus share of earnings |
Conclusion
Accounting for intangibles and goodwill shows the limits of the historical cost model. Internally developed intangibles are expensed for reasons of reliability, at a cost in relevance that research suggests has grown. Goodwill impairment testing replaced amortization to provide better information, but evidence questions its timeliness, and both boards have so far declined to change course. Raritan's case shows how these rules can make similar companies look very different.
References
Lev, B., & Zarowin, P. (1999). The boundaries of financial reporting and how to extend them. Journal of Accounting Research, 37(2), 353-385. https://doi.org/10.2307/2491413
Li, K. K., & Sloan, R. G. (2017). Has goodwill accounting gone bad? Review of Accounting Studies, 22(2), 964-1003. https://doi.org/10.1007/s11142-017-9401-7
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2011). Financial accounting theory and analysis: Text and cases (10th ed.). John Wiley & Sons.
ACC 6030 Module 10 instructions, in plain terms
Long-term investments and intangibles close the course in the tenth written assignment. Prompts here may ask about the recognition and measurement of intangibles, research and development, goodwill accounting and its history, the equity method and other investment models, or the broader question of whether financial statements capture the value of modern companies. Because goodwill accounting has been debated since the 10th edition was published, check recent standard-setting decisions. The theory here is tested on an invented medical device maker. Expect questions on why internally generated intangibles are expensed, how acquired ones are recognized and whether reporting should change. The questions usually ask why research spending is expensed while purchased intangibles are capitalized, and what that asymmetry does to comparability.
How the ACC 6030 Module 10 example is put together
The paper opens by contrasting accounting's origins in physical assets with knowledge-based companies. The intangibles section explains the expensing rule and its rationale and presents research on the declining relevance of financial statements. The goodwill section traces the move to impairment testing, reports evidence on its effects and describes the boards' recent decisions. The investments section ties the measurement models to the same tension. A table sets the device maker's home-grown intangibles beside the ones it bought, and the closing section names the gaps this leaves in the balance sheet. The final section judges whether recognizing more intangibles would help users.
Reading the ACC 6030 Module 10 grading rubric
The intangibles paper closes the ten written assignments worth half the grade. For this module, mentors look for accurate statements of the rules for intangibles, research and development, goodwill and investments, a clear explanation of the reasoning behind them, research evidence on their effects and current information on standard-setting decisions. An application that shows how the rules affect comparability earns credit. Papers lose points when they state that goodwill is amortized by public companies or ignore recent developments in the debate. Using research on R&D and earnings usefulness as evidence, rather than opinion, shows graduate-level analysis. Recommendations that weigh reliability against relevance earn the strongest marks. Mentors also look for a balanced view of recognizing more intangibles, weighing reliability against relevance with evidence from research.
ACC 6030 Module 10 help: mistakes that cost marks
Students often confuse the treatment of internally developed and acquired intangibles, or describe goodwill as amortized for public companies, which it has not been since 2001. Check current rules and recent decisions, including the FASB's 2022 removal of its goodwill project. Use research to support claims about relevance and impairment timeliness. Apply the rules to a company to show their effects on comparability. Distinguish purchased from internally generated intangibles throughout, since the rules differ. Back every claim about decision usefulness with a study. A free first sample of your own ACC-6030 Module 10 paper is available on request.
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ACC 6030 Module 10 questions, answered
Where can I find a free ACC 6030 Module 10 sample paper?
The intangibles and goodwill theory paper is printed above: unrecorded internal intangibles, research on relevance, the goodwill amortization debate, investment models and a device maker example.
Are internally developed intangibles recorded under U.S. GAAP?
Generally no. Research and development and the costs of building brands and customer relationships are expensed, while acquired intangibles are recorded at fair value.
Is goodwill amortized?
Public companies under U.S. GAAP and IFRS test goodwill for impairment rather than amortizing it; private companies under U.S. GAAP may elect to amortize it over up to ten years.
What did the FASB decide about goodwill in 2022?
It removed its project on goodwill amortization and impairment from its agenda without changing the impairment-only model for public companies.
Why might goodwill impairments be delayed?
Research such as Li and Sloan's found impairments became less timely after amortization ended, consistent with managers using discretion in impairment tests.