What are the amortization methods of Huawei intangible assets?

Amortization of intangible assets refers to the systematic and reasonable allocation of the amortization amount of intangible assets with limited service life during their service life. Including amortization of intangible assets such as patent right, trademark right, copyright, land use right and non-patented technology.

Amortization methods of intangible assets include average amortization method and accelerated amortization method. The average amortization method includes straight-line method, total output method and traffic flow method. Acceleration method includes double declining balance method, sum of years method, etc.

First, the straight line method

The straight-line method, also known as the average life method, is a method to evenly distribute the amortization amount of intangible assets to each accounting period.

Second, the total production method

Output method refers to a method to calculate the amortization amount according to the output provided by intangible assets during the whole use period. It is based on the premise that the value of intangible assets consumed by unit output is equal. The calculation formula is as follows:

Amortization amount of unit output = amortization amount of uncertain assets in each period = amortization amount of unit output × actual output in this period.

Third, the accelerated amortization method

The accelerated amortization method is relative to the constant-speed straight-line amortization with equal annual amortization. It is an amortization method of intangible assets with more amortization in the early stage and less amortization in the later stage, and the amortization amount is decreasing year by year.

(1) Declining Balance Method

Declining balance method is a method to calculate the amortization amount of intangible assets by subtracting the accumulated amortization amount from the initial cost of intangible assets and multiplying it by the straight-line amortization rate without considering the estimated residual value of intangible assets in the early stage.

(2) Sum of Years Method

The sum of years method is a method to calculate the annual amortization amount by subtracting the estimated residual value from the cost of intangible assets and multiplying it by the amortization rate that decreases year by year.

When amortizing intangible assets, the accounting entries are:

Debit: management expenses-amortization of intangible assets

Loan: intangible assets