Explain specific journal entry for trademark registration-related expense !

Accounting for expenses related to trademark

I’ve filed a trademark application and I’m trying to perform accounting of its expenses. But I don’t know how to journalize them since it’s new to me.

There are a few things to keep in mind when making journal entries, such as the treatment of consumption tax and the use of different accounts depending on the amount of expenses.

I see. I have filed a trademark application this time, but I’d like to know exactly how I should journalize for future registration and renewal of the application.

This article will provide specific instructions on how to include journal entries for expenses related to trademarks in Japan.

Principles in Accounting in Japan

In accounting of expenses related to trademarks in Japan, the principles are as follows:

• Trademark rights are recorded as “intangible fixed assets” and amortized over a useful life of 10 years.
• Amortization shall begin on “a registration date” and be amortized using the “straight-line method”.

Difference in accounting method by cost (acquisition cost)

Accounting methods vary depending on the amount of expenses and the size of companies. The broad classifications are as follows:

• The cost less than 100,000 yen can be recorded as a “loss”.
• The cost between 100,000 yen and 200,000 yen can be recorded as a “lump-sum amortizable asset”.
• The cost 200,000 yen or more is recorded as an “intangible fixed asset”.

Please note that the system of special provisions may be applicable depending on the size of the company.
For details, please refer to the article site below.

Examples of specific journal entries

The timing of expenses related to trademarks are “before filing”, “at filing”, “from filing to registration”, “at registration”, and “at renewal”. The journal entries at each time will be explained with specific examples.

Example of journal entry “before filing trademark application”

Pre-filing expenses are recorded as an “intangible asset”. Possible pre-filing expenses include a “design fee” for requesting a design company to create a logo mark, and a “trademark search fee” for requesting a search company/patent firm (patent attorney) to conduct a trademark search. Specific examples of journal entries are as follows:

• 150,000 yen was paid in cash to a design company as a trademark design fee.
• 50,000 yen was paid in cash to a patent firm as a trademark search fee.

Example of journal entry “at filing of trademark application”

The costs at the time of filing include “filing fee” of a patent firm for preparing application documents and digitization of those documents, and an “official fee” required for filing the application with the Japan Patent Office. Unlike the costs incurred before filing, the costs required for registration of a trademark application are recorded as “a loss” in the accounting.

he official fee is non-taxable and should be journalized as the account title “taxe and public due”. Specific journal entry examples are as follows:

• 70,000 yen was paid in cash to the patent firm as a filing fee.
• 20,000 yen was paid in cash to the patent firm as an official fee.

Example of journal entry “from filing to pre-registration”

If, during the period between filing of a trademark application and its registration, the JPO determines for some reasons that the application as filed cannot be registered, it is necessary to file a response by submitting documents to, for example, amend the application to register the trademark application.

The cost at that time includes a “response fee” to be paid to the patent firm. In this case, for the same reason as in the case of filing the application, the cost is recorded as a “deductible expense” in the accounting. A specific journal entry example is shown below.

• 100,000 yen was paid in cash to the patent firm as a response fee.

Example of journal entry “at trademark registration”

Once the examination is successfully completed and the registration is granted, a registration fee for the establishment of trademark rights must be paid.

The costs at the time of registration include a “success fee,” which is charged when a patent firm has been commissioned to perform the series of procedures, and a “registration fee”, and also includes an “official fee” required at the time of registration. Examples of specific journal entries are as follows:

The official registration fee can be paid in one of two ways: in two installments for five years, or in a lump-sum payment for ten years. In both cases, the account title “taxe and public due” is used.

• 60,000 yen was paid in cash to the patent firm as a trademark registration fee.
• 65,000 yen was paid in cash to the patent firm as an official registration fee.

Example of journal entry “at trademark renewal”

Renewal procedures are required every 10 years for trademark rights to continue to exist. The costs of such procedures include an official fee for renewal registration and a fee for renewal by a patent firm.

In principle, the costs associated with trademark rights must be amortized annually as an “intangible fixed asset” with a legal life of 10 years. Depending on the amount of expenses, it may also be treated as a lump-sum amortizable asset. It should be noted that an applicable process depends on the amount of expenses.

Examples of specific journal entries are as follows:

• 30,000 yen was paid in cash to a patent firm as a fee for renewal registration.
• 85,000 yen was paid in cash to a patent firm as an official fee.

• Trademark rights acquired for 500,000 yen are amortized over their legal life of 10 years.
• On closing the accounts, 50,000 yen of the trademark rights was amortized.

I got it！Thanks to the detailed explanation of the jornal entries at each timing, I understand what should be noted.

Other journal entries

The following is another example of journal entries for royalty payments for the use of trademark rights of a third party’s company.

≪At payment≫

• A license agreement that allows the own company to handle a third party’s registered trademark was concluded and 300,000 yen in cash was paid to Company T as a license fee.
• The term of the license agreement is five years.
• The agreement is made between the domestic businesses and the consumption tax rate is 10%.

≪At closing of account≫

• Trademark rights acquired for 300,000 yen at the beginning of the period are amortized over their legal life of 5 years.
• At the closing of account, long-term prepaid expense (royalty) of 60,000 yen was amortized.

Summary

In this article, we have explained the accounting of expenses related to trademarks, introducing information on accounts and journal entries in Japan.
Since fees and official fees are incurred for trademark-related procedures, it is necessary to understand how to make journal entries for each of the fees. In addition, since accounting procedures and consumption taxation are also complicated, it is important to have the correct knowledge.
The appropriate processing method may vary depending on individual circumstances, so we recommend that you consult with an accountant, tax accountant, or other specialists to confirm the details in advance.