WorksheetsIntangible NCA
Total questions: 20
Worksheet time: 29mins
According to IAS 38 Intangible assets, which of the following statements about research and
development expenditure are correct?
1 Research expenditure, other than capital expenditure on research facilities, should be recognised
as an expense as incurred.
2 In deciding whether development expenditure qualifies to be recognised as an asset, it is
necessary to consider whether there will be adequate finance available to complete the project.
3 Development expenditure recognised as an asset must be amortised over a period not exceeding
five years.
1, 2 and 3
1 and 2 only
1 and 3 only
2 and 3 only
According to IAS 38 Intangible assets, which of the following statements about research and
development expenditure are correct?
1 If certain conditions are met, an entity may decide to capitalise development expenditure.
2 Research expenditure, other than capital expenditure on research facilities, must be written off as
incurred.
3 Capitalised development expenditure must be amortised over a period not exceeding 5 years.
4 Capitalised development expenditure must be disclosed in the statement of financial position
under intangible non-current assets.
1, 2 and 4 only
1 and 3 only
2 and 4 only
3 and 4 only
According to IAS 38 Intangible assets, which of the following statements concerning the accounting
treatment of research and development expenditure are true?
1 Development costs recognised as an asset must be amortised over a period not exceeding five
years.
2 Research expenditure, other than capital expenditure on research facilities, should be recognised
as an expense as incurred.
3 In deciding whether development expenditure qualifies to be recognised as an asset, it is
necessary to consider whether there will be adequate finance available to complete the project.
4 Development projects must be reviewed at each reporting date, and expenditure on any project
no longer qualifying for capitalisation must be amortised through the statement of profit or loss
and other comprehensive income over a period not exceeding five years.
1 and 4
2 and 4
2 and 3
1 and 3
According to IAS 38 Intangible assets, which of the following statements is/are correct?
1 Capitalised development expenditure must be amortised over a period not exceeding five years.
2 If all the conditions specified in IAS 38 are met, development expenditure may be capitalised if
the directors decide to do so.
3 Capitalised development costs are shown in the statement of financial position under the heading
of non-current assets.
4 Amortisation of capitalised development expenditure will appear as an item in a company’s
statement of changes in equity.
3 only
2 and 3
1 and 4
1 and 3
According to IAS 38 Intangible assets, which of the following are intangible non-current assets in the
financial statements of Iota Co?
1 A patent for a new glue purchased for $20,000 by Iota Co
2 Development costs capitalised in accordance with IAS 38
3 A licence to broadcast a television series, purchased by Iota Co for $150,000
4 A state of the art factory purchased by Iota Co for $1.5million
1 and 3 only
1, 2 and 3 only
2 and 4 only
2, 3 and 4 only
According to IAS 38 Intangible assets, which of the following statements about intangible assets are
correct?
1 If certain criteria are met, research expenditure must be recognised as an intangible asset.
2 If certain criteria are met, development expenditure must be capitalised
3 Intangible assets must be amortised if they have a definite useful life
2 and 3 only
1 and 3 only
1 and 2 only
All three statements are correct
According to IAS 38 Intangible assets, which of the following statements concerning the accounting
treatment of research and development expenditure are true?
1 If certain criteria are met, research expenditure may be recognised as an asset.
2 Research expenditure, other than capital expenditure on research facilities, should be recognised
as an expense as incurred.
3 In deciding whether development expenditure qualifies to be recognised as an asset, it is
necessary to consider whether there will be adequate finance available to complete the project.
4 Development expenditure recognised as an asset must be amortised over a period not exceeding
five years.
5 The financial statements should disclose the total amount of research and development
expenditure recognised as an expense during the period.
1, 4 and 5
2, 4 and 5
2, 3 and 4
2, 3 and 5
According to IAS 38 Intangible assets, which of the following statements are correct?
1 Research expenditure should not be capitalised.
2 Intangible assets are never amortised.
3 Development expenditure must be capitalised if certain conditions are met.
1 and 3 only
1 and 2 only
2 and 3 only
All three statements are correct
According to IAS 38 Intangible assets, what amount should be charged in the statement of profit or loss and other comprehensive income for research and development costs for the year ended 31 December 20X7?
The following balances existed in the accounting records of Koppa Co, at 31 December 20X7. $’000
Development costs capitalised, 1 January 20X7 180
Research and development expenditure for the year 162
In preparing the company’s statement of profit or loss and other comprehensive income and statement of
financial position at 31 December 20X7 the following further information is relevant.
The $180,000 total for development costs as at 1 January 20X7 relates to two projects: $’000
Project 836: completed project 82
(balance being amortised over the period expected to benefit from it.
Amount to be amortised in 20X7: $20,000)
Project 910: in progress 98
180
(b) The research and development expenditure for the year is made up of: $’000
Research expenditure 103
Development costs on Project 910 which continues to satisfy the
requirements in IAS 38 for capitalization 59
162
$123,000
$182,000
$162,000
$103,000
The following balances existed in the accounting records of Koppa Co, at 31 December 20X7. $’000
Development costs capitalised, 1 January 20X7 180
Research and development expenditure for the year 162
In preparing the company’s statement of profit or loss and other comprehensive income and statement of
financial position at 31 December 20X7 the following further information is relevant.
(a) The $180,000 total for development costs as at 1 January 20X7 relates to two projects: $’000
Project 836: completed project 82
(balance being amortised over the period expected to benefit from it.
Amount to be amortised in 20X7: $20,000)
Project 910: in progress 98
180
(b) The research and development expenditure for the year is made up of: $’000
Research expenditure 103
Development costs on Project 910 which continues to satisfy the
requirements in IAS 38 for capitalization 59
162
According to IAS 38 Intangible assets, what amount should be disclosed as an intangible asset in the
statement of financial position for the year ended 31 December 20X7?
$219,000
$180,000
$160,000
$59,000
Theta Co purchased a patent on 31 December 20X3 for $250,000. Theta Co expects to use the patent for ten years, after which it will be valueless. According to IAS 38 Intangible assets, what amount will
be amortised in Theta Co’s statement of profit or loss and other comprehensive income for the year
ended 31 December 20X4?
$250,000
$125,000
$25,000
$50,000
PF purchased a quota for carbon dioxide emissions for $15,000 on 30 April 20X6 and capitalised it as an intangible asset in its statement of financial position. PF estimates that the quota will have a useful
life of 3 years. What is the journal entry required to record the amortisation of the quota in the accounts
for the year ended 30 April 20X9?
Dr Expenses $15,000 Cr Accumulated amortization $15,000
Dr Expenses $5,000 Cr Accumulated amortisation $5,000
Dr Intangible assets $5,000 Cr Accumulated amortization $5,000
Dr Accumulated amortization $15,000 Cr Intangible assets $15,000
What is the purpose of amortisation?
To allocate the cost of an intangible non-current asset over its useful life
To ensure that funds are available for the eventual purchase of a replacement non-current asset
To reduce the cost of an intangible non-current asset in the statement of financial position to its estimated market value
To account for the risk associated with intangible assets
Which of the following items (that all generate future economic benefits, and whose costs can be
measured reliably), is an intangible non-current asset?
1 Computer hardware owned by a business
2 Operating software that operates the computer hardware in (1)
3 A patent bought by a business
4 An extension to an office building owned by a business
All four items
1, 2 and 4 only
1 and 2 only
3 only
Which one of the following four statements is correct?
Amortisation of capitalised development expenditure will appear as an item in an entity’s statement of changes in equity.
Amortisation of capitalised development expenditure will appear as an item in an entity’s 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 other comprehensive income 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.
Classify each of the following costs as either a research expense or as an intangible asset.
Research expense and Intangible asset
Market research costs
Patented product design costs
Both intangible assets
Both Research expenses
Research expense and Intangible asset
Intangible asset and Research expense
Which one 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
Which THREE of the following statements are correct in relation to application of IAS 38 Intangible Assets?
(A) Research costs should be expenses to the statement of profit or loss.
(B) All types of goodwill can be capitalised.
(C) Capitalised development costs that no longer meet the criteria specified by IAS 38 must be written off to the statement of profit or loss.
(D) Capitalised development costs are amortised from the date the assets is available to use or sell.
(E) Research costs written off can be re-capitalised when the developed asset is feasible.
(F) Only purchased intangibles can be capitalised.
(A), (C), (E)
(A), (C), (B)
(A), (C), (F)
(A), (C), (D)
