FA- INTAGIBLE ASSETS

Which of the following statements is correct?

• If all the conditions specified in IAS 38 Intangible assets are met, the directors can

  chose whether to capitalise the development expenditure or not.

• Amortisation of capitalised development expenditure will appear as an item in an

  entitvs statement of changes in equity.

• Capitalised development costs are shown in the statement Of financial position as non-

  current assets,

• Capitalised development expenditure must be amortised over a period not exceeding

  five years.

Complete the following statement by selecting the appropriate wording from the choice

available.

When accounting for intangible assets using the revaluation model, movements in the

carrying amount are..............................................................

• accounted for in other comprehensive income and other components of equity

• accounted for in the statement of profit or loss only

• accounted for in other comprehensive income only

• accounted for on other components of equity only

What is the correct accounting treatment for an intangible asset with an indefinite useful

life?

• It is recognised at cost for as long as the entity has the intangible asset.

• It is recognised at cost and is subject to an annual impairment review.

• It is recognised at cost and the entity must make an estimate of estimated useful life

  so that it can be amortised.

• It cannot be recognised as an intangible asset as it would not be possible to calculate

  an annual amortisation charge.

Complete the following statement by selecting the appropriate wording from the choice

available.

When accounting for intangible assets using the cost model, annual impairment charges are:

• accounted for in other comprehensive income and other components of equity

• accounted for in the statement of profit or loss only

• accounted for in other comprehensive income only

• accounted for in other components of equity only

Which of the following statements best defines an intangible asset?

• An intangible asset is an asset with no physical substance

• An intangible asset is always generated internally by a business

• An intangible asset is an asset which cannot be sold

• An intangible asset is a purchased asset which has no physical substance

Merlot Co is engaged in a number Of research and development projects during the year

ended 31 December 20X5:

Project A — A project to investigate the properties Of a chemical compound, Costs incurred

on this project during the year ended 31 December 20X5 were $34,000.

Project B — A project to develop a new process which will save production time in the

manufacture Of widgets. This project commenced on 1 January 20X5 and met the

capitalisation criteria on 31 August 20X5. The cost incurred during 20X5 was $78,870 to

31 August and $27,800 from 1 September,

Project C— A development project which was completed on 30 June 20X5. Development costs

incurred up to 31 December 20X4 were $290,000, with a further $19,800 incurred between

January and June 20X5. Production and sales of the new product commenced on

1 September and are expected to last 36 months.

What amount should be expensed to the statement of profit or loss and other

comprehensive income of Merlot Co in respect of these projects in the year ended

31 December 20X5?

• $147,292

• $157,292

• $146,297

• $157,297

Campbell Co purchased a licence at a cost of to sell a product for a five-year term

commencing 1 July 20X3, after which the licence will expire and cannot be renewed. It is

Campbell CO's policy to write off the cost of the licence over the five-year term commencing

from the date of purchase.

What was the amortisation charge for the year ended 31 March 20X4?

• $540,000

• $560,000

• $580,000

• $520,000

XYZ Co undertakes a development project which has incurred $1,500,000 of expenditure that can be capitalised in accordance with IAS 38. It is expected that the knowledge gained from the development project will be available to use on a commercial basis by the business on 1 July 20X4 and will be used for a period of five years. XYZ Co has a policy of pro rata depreciation and amortisation.

How much will the profit of XYZ Co for the year ended 31 March 20X5 fall as a result of the development expenditure?

• 1. $0

• 1. $225,000

• 1. $300,000

• 1. $1,500,000

Which one of the following is an example of an intangible asset?

• 1. A lease of land

• 1. A registered trademark

• 1. Royalty receipts

• 1. An investment in a listed company

IAS 38 provides examples of research and development activities, for example:

1. 1. Formulating new products

2. 2. Testing pre-production prototypes

3. 3. Designing tools involving new technology

4. 4. Constructing a pilot plant

6. Which of these examples are development activities?

• 1. 1, 2 and 3

• 1. 1, 2 and 4

• 1. 1, 3 and 4

• 1. 2, 3 and 4