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11 March, 03:14

Freya Co. has two patents that have allegedly been infringed by competitors. After investigation, legal counsel informed Freya that it had a weak case for Patent A34 and a strong case in regard to Patent B19. Freya incurred additional legal fees to stop infringement on Patent B19. Both patents have a remaining legal life of 8 years. How should Freya account for these legal costs incurred relating to the two patents?

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  1. 11 March, 07:03
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    Freya needs to expense costs for Patent A34 and capitalize costs for Patent B19.

    Explanation:

    Based on the scenario being described it can be said that Freya needs to expense costs for Patent A34 and capitalize costs for Patent B19. That is because a successful defense of a patent needs to be capitalized and amortized since you can now monetize and recover the costs incurred as well as make a profit off of the patent. On the other hand, unsuccessful defense of a patent needs to be expensed as incurred since that patent cannot be used to make money and recover costs.
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Home » Business » Freya Co. has two patents that have allegedly been infringed by competitors. After investigation, legal counsel informed Freya that it had a weak case for Patent A34 and a strong case in regard to Patent B19.
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