Trademarks appear in which balance sheet section

Amortization is shown on the company's general ledger as an expense. To set up the asset account in your general ledger, debit the total cost of the trademark. Credit this asset account by the monthly amortization amount each month and debit the amortization expense account. Some expenses related to development must be expensed instead of amortizing them over the life of the trademark. Expense any costs that cannot be assumed to bring a tangible future benefit.

This includes general research and development costs and software costs before the company has created a viable design of the trademark. Record the expense in the accounting period in which the cost occurs. Direct costs incurred in creating or obtaining a trademark should be capitalized and amortized. These costs may include design and consulting fees, registration fees and legal or court fees incurred while acquiring or defending the trademark. You may can capitalize software costs once you have a finished trademark to submit with your application.

If the trademark was purchased from another company, capitalize it at the value you paid or its fair market value. For tax purposes, trademarks are considered intangible assets as defined in Section of the Internal Revenue Code.

The trademark must be expected to bring in future economic benefits and may not have a physical presence in the company's inventory. To qualify as a long-term asset for amortization, the trademark must last at least 12 months. Amortize the trademark over months to determine your allowable tax deduction.

You must complete Form if you have any trademark amortization deductions to report. Transfer the total from line 44 to the "Other Expenses" or "Other Deductions" section of your company's annual tax return. If you can touch it, it's a tangible asset; if not, then it's intangible. A trademark isn't a physical object. It's simply the legal right to use a name, logo or other identifier in business. As such, trademarks on the balance sheet will commonly be included in an entry for "intangible assets.

Under accounting rules, a company can put an asset on its balance sheet only if it can determine a "fair value" for that asset, usually as the result of a sale. If your company buys a trademark from someone else, then that purchase established a fair value for the trademark. As a result, you can put the trademark on your balance sheet with a value equal to what you paid for it. But a trademark that's internally generated -- that is, one that your company came up with itself -- doesn't have a fair value attached to it.

You only know what you think it's worth, but that's not good enough under accounting standards, so you can't put it on the balance sheet. Many of the most valuable and famous trademarks -- Disney's Mickey Mouse, the shape of the Coca-Cola bottle -- don't appear on their owners' balance sheets because they were internally generated.