Question 1

Explain the difference between an 'infinite life' and an 'indefinite life'.

Accepted Answer

IAS 38 requires the useful life,residual

Question 2

Explain why intangible assets are required to be reported as a separate class of asset in the statement of financial position.

Accepted Answer

Intangible assets are generally defined

Question 3

Purchased goodwill is recognised as the amount of:

Accepted Answer

A) the excess of the cost of acquisition incurred by an acquirer over the fair value of the identifiable net assets acquired. 
B) the difference between the cost of acquisition of a subsidiary and the realisable value of net assets of the subsidiary. 
C) the lower of the sum of related expenditures on advertising and promotion undertaken in the last two years by the subsidiary being purchased and the independent valuation of the market value of that subsidiary's goodwill. 
D) the excess of the cost of acquisition incurred by an acquirer over the fair value of the identifiable net assets and contingent liabilities acquired. 
A) the excess of the cost of acquisition incurred by an acquirer over the fair value of the identifiable net assets acquired. 
B) the difference between the cost of acquisition of a subsidiary and the realisable value of net assets of the subsidiary. 
C) the lower of the sum of related expenditures on advertising and promotion undertaken in the last two years by the subsidiary being purchased and the independent valuation of the market value of that subsidiary's goodwill. 
D) the excess of the cost of acquisition incurred by an acquirer over the fair value of the identifiable net assets and contingent liabilities acquired.

Question 4

IAS 38 states that intangible assets:

Accepted Answer

A) may not be revalued and must be amortised over their useful lives. 
B) are only able to be revalued if they have been internally generated and there is an active market for them. 
C) may only be revalued to their fair value as assessed by a licensed valuer. 
D) may be measured by using either the cost model or the revaluation model. 
A) may not be revalued and must be amortised over their useful lives. 
B) are only able to be revalued if they have been internally generated and there is an active market for them. 
C) may only be revalued to their fair value as assessed by a licensed valuer. 
D) may be measured by using either the cost model or the revaluation model.

Question 5

Discuss the benefits of subjecting goodwill to impairment testing as opposed to amortisation.In your answer,consider the relevance and faithfully represented qualitative characteristics of financial information.

Accepted Answer

There is discussion

Question 6

Which of the following is not a directly attributable cost of research and development?

Accepted Answer

A) costs of employee benefits arising from the generation of the intangible asset 
B) fees to register a legal right 
C) costs of materials consumed in generating the intangible asset 
D) All of the given answers are correct. 
A) costs of employee benefits arising from the generation of the intangible asset 
B) fees to register a legal right 
C) costs of materials consumed in generating the intangible asset 
D) All of the given answers are correct.

Question 7

An intangible asset may be recorded:

Accepted Answer

A) if acquired from an external party at a cost. 
B) if it is internally generated and fits the definition of an asset and meets the associated recognition criteria. 
C) at a value other than cost if that value more reliably records the worth of the intangible asset. 
D) at the cost of the asset, which must exclude any additional expenditure required to prepare the asset for use. 
A) if acquired from an external party at a cost. 
B) if it is internally generated and fits the definition of an asset and meets the associated recognition criteria. 
C) at a value other than cost if that value more reliably records the worth of the intangible asset. 
D) at the cost of the asset, which must exclude any additional expenditure required to prepare the asset for use.

Question 8

Explain why research expenditures and expenditures on internally generated such as,brands,mastheads and publishing titles are not capitalised regardless of whether they are likely to generate future economic benefits.

Accepted Answer

Paragraph 54 of IAS 38 states that no in

Question 9

Buster Plc had purchased goodwill to the value of €100 000 recorded in its consolidated financial statements.The goodwill has been determined to have an indefinite useful life.However,one year later Buster Plc's cash generating units has been determined to have incurred an impairment loss of €13 000.What is the appropriate action for Buster limited to comply with IAS 38 Intangible Assets and IAS 36 Impairment of Assets?

Accepted Answer

A) Write-off goodwill in its entirety as goodwill no longer exists. 
B) Recognise impairment loss of €13 000 and credit goodwill. 
C) Amortise goodwill for 20 years using straight-line method. 
D) Recognise impairment loss of €13 000 and credit equity. 
A) Write-off goodwill in its entirety as goodwill no longer exists. 
B) Recognise impairment loss of €13 000 and credit goodwill. 
C) Amortise goodwill for 20 years using straight-line method. 
D) Recognise impairment loss of €13 000 and credit equity.

Question 10

The gain or loss on the disposal of an intangible asset is determined as the difference between:

Accepted Answer

A) net proceeds from the disposal and the amortised amount. 
B) net proceeds from the disposal and the recoverable amount. 
C) net proceeds from the disposal and the carrying amount. 
D) net proceeds from the disposal and the initial cost. 
A) net proceeds from the disposal and the amortised amount. 
B) net proceeds from the disposal and the recoverable amount. 
C) net proceeds from the disposal and the carrying amount. 
D) net proceeds from the disposal and the initial cost.

Question 11

Where a revaluation occurs,it is to be to the fair value of the asset.

Accepted Answer

A) True 
 B)False

Question 12

Discuss the factors considered to determine amortisation of deferred development costs.

Accepted Answer

Paragraph 57 of IAS 38 requires that exp

Question 13

Earth Ltd acquired Moon Plc on 1 July 2013 for the sum of £100 000.On the same date Moon Plc has the following assets and liabilities: $$\begin{array} { | l | r | r | r | } 
\hline & \text { Carrying amount } & \text { Recoverable amount } & \text { Fair value } \
\hline \text { Assets: } & & & \
\hline \text { Land } & 100000 & 130000 & 150000 \
\hline \text { Machinery } & 50000 & 30000 & 40000 \
\hline \text { Cash } & 20000 & & \
\hline \text { Liabilities: } & & & \
\hline \text { Loan } & 105000 & & \
\hline \text { Contingent liabilities } & 80000 & & \
\hline
\end{array}$$ What is the value of goodwill,if any?

Accepted Answer

A) They are not required to recognise goodwill. 
B) £35 000 
C) £75 000 
D) surplus of £5000 
A) They are not required to recognise goodwill. 
B) £35 000 
C) £75 000 
D) surplus of £5000

Question 14

Far-flung Co Ltd purchases Local Co Ltd for the purchase consideration of: $\begin{array}{|l|l|}
\hline \text { Cash } & \$ 100,000 \
\hline \text { Shares in Far-flung Co Ltd } & 50000 \text { shares with a market value of } \$ 1.60 \
\hline{\text { Land }} & \text { Carrying value of } \$ 90,000 \
\hline& \text { Fair value of } \$ 100,000\\hline
\end{array}$ Far-flung incurred legal fees of $6000 to complete the acquisition.Local Co Ltd had the following assets and liabilities at the time of the purchase $$\begin{array} { | l | r | r | r | } 
\hline & \text { Carrying amount } & \text { Recoverable amount } & \text { Fair value } \
\hline \text { Assets: } & & & \
\hline \text { Land } & 100000 & 150000 & 200000 \
\hline \text { Machinery } & 50000 & 80000 & 85000 \
\hline \text { Cash } & 20000 & & \
\hline \text { Liabilities: } & & & \
\hline \text { Loan } & 105000 & & \
\hline
\end{array}$$ What is the value of goodwill,if any?

Accepted Answer

A) $0 
B) $80 000 
C) $141 000 
D) $86 000 
A) $0 
B) $80 000 
C) $141 000 
D) $86 000

Question 15

Glass 4 Windows is involved in a research and development project to create a filtering window that removes the need for curtains.For the current year ended 30 June 2011 expenditure on the project is as follows: $$\begin{array} { | l | l | } 
\hline \text { Research } & \$ 235000 \
\hline \text { Development costs } & \$ 350000 \
\hline
\end{array}$$ The window is expected to earn revenues of $70 000 per year for the 10 years commencing 1 July 2011.Assuming straight-line amortisation,how much of the research and development cost should be expensed this period and what amount should be amortised in the year ended 30 June 2014?

Accepted Answer

A) Expensed in 2011: $58 500; amortisation in 2014: $58 500 
B) Expensed in 2011: $235 000; amortisation in 2014: $35 000 
C) Expensed in 2011: $235 000; amortisation in 2014: $28 000 
D) Expensed in 2011: $350 000; amortisation in 2014: $23 500 
A) Expensed in 2011: $58 500; amortisation in 2014: $58 500 
B) Expensed in 2011: $235 000; amortisation in 2014: $35 000 
C) Expensed in 2011: $235 000; amortisation in 2014: $28 000 
D) Expensed in 2011: $350 000; amortisation in 2014: $23 500

Question 16

Internally generated identifiable intangible assets may be recognised for financial accounting purposes in Europe.

Accepted Answer

A) True 
 B)False

Question 17

Continuously Contemporary Accounting (CoCoA)emphasises an entity's ability to adapt.Therefore goodwill is considered an important asset in this model.

Accepted Answer

A) True 
 B)False

Question 18

Walking on Air is developing a new form of individual transport that will act like a personal hovercraft.Costs for the year ended 30 June 2012 are: $$\begin{array} { | l | l | } 
\hline \text { Research } & \$ 950000 \
\hline \text { Development costs } & \$ 650000 \
\hline
\end{array}$$ Due to the high individual cost of items,sales of this 'prototype' model will be small and generate $100 000 per year over the next 4 years.Following that time,a new and cheaper consumer model will be under production based on the research developed for the prototype; however,it will require additional development expenditure.How much of the research and development cost should be expensed in the period ended 30 June 2012 and what amount should be amortised in the year ended 30 June 2006 (rounded to the nearest dollar)?

Accepted Answer

A) Expensed in 2012: $1 200 000; amortisation in 2014: $100 000 
B) Expensed in 2012: $950 000; amortisation in 2014: $216 667 
C) Expensed in 2012: $950 000; amortisation in 2014: $65 000 
D) Expensed in 2012: $1 200 000, amortisation in 2014: $30 000 
A) Expensed in 2012: $1 200 000; amortisation in 2014: $100 000 
B) Expensed in 2012: $950 000; amortisation in 2014: $216 667 
C) Expensed in 2012: $950 000; amortisation in 2014: $65 000 
D) Expensed in 2012: $1 200 000, amortisation in 2014: $30 000

Question 19

Shelley Beach Plc has one cash generating unit (CGU)and it has been determined that the CGU has incurred an impairment loss of £80 000 for the year ended 30 June 2014. The carrying amounts of the assets as at 30 June 2014 are as follows: $$\begin{array} { | l | r | } 
\hline & \text { Carrying amount } \
\hline \text { Buildings } & 300000 \
\hline \text { Equipment } & 300000 \
\hline \text { Goodwill } & 20000 \
\hline \text { Total } & \underline { 620000 } \
\hline
\end{array}$$ In accordance with IAS 36 Impairment of Assets,what should be the carrying amounts for buildings,equipment and goodwill as at 30 June 2014,respectively?

Accepted Answer

A) £240 000; £300 000; £0 
B) £260 000; £260 000; £20 000 
C) £270 000; £270 000; £0 
D) £300 000; £300 000; £20 000 
A) £240 000; £300 000; £0 
B) £260 000; £260 000; £20 000 
C) £270 000; £270 000; £0 
D) £300 000; £300 000; £20 000

Question 20

Serendipity Ltd is working on two independent research and development projects.Project A has recently been fruitful and the resulting product has been marketed,unfortunately with limited success.Development of the product is continuing in an effort to improve its marketability.Project B is due for product release in one year's time.The initial marketing surveys and forward contracts suggest that the outcome for this product is very favourable.The following information relates to the expenditures for the current period and budgeted figures for the next 3 years.All research costs in prior periods were expensed.The budgeted figures are considered accurate beyond a reasonable doubt.   What is the research and development deferral for each project in 2013?

Accepted Answer

A) Project A $5000; Project B $0 
B) Project A $47 000; Project B $131 000 
C) Project A $30 000; Project B $90 000 
D) Project A $62 000; Project B $131 000 
A) Project A $5000; Project B $0 
B) Project A $47 000; Project B $131 000 
C) Project A $30 000; Project B $90 000 
D) Project A $62 000; Project B $131 000

Explain the difference between an 'infinite life' and an 'indefinite life'.

Explain why intangible assets are required to be reported as a separate class of asset in the statement of financial position.

Purchased goodwill is recognised as the amount of:

IAS 38 states that intangible assets:

Discuss the benefits of subjecting goodwill to impairment testing as opposed to amortisation.In your answer,consider the relevance and faithfully represented qualitative characteristics of financial information.

Which of the following is not a directly attributable cost of research and development?

An intangible asset may be recorded:

Explain why research expenditures and expenditures on internally generated such as,brands,mastheads and publishing titles are not capitalised regardless of whether they are likely to generate future economic benefits.

The gain or loss on the disposal of an intangible asset is determined as the difference between:

Where a revaluation occurs,it is to be to the fair value of the asset.

Discuss the factors considered to determine amortisation of deferred development costs.

Internally generated identifiable intangible assets may be recognised for financial accounting purposes in Europe.

Continuously Contemporary Accounting (CoCoA)emphasises an entity's ability to adapt.Therefore goodwill is considered an important asset in this model.

An Overview of the International External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

An Overview of Accounting for Liabilities

Accounting for Leases

Share Capital, Reserves and Share Options Employee Bonus Schemes

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Income Taxes

The Statement of Cash Flows

Events Occurring After the Reporting Date

Related-Party Disclosures

Earnings Per Share

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues III: Accounting for Indirect Ownership Interest

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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Exam 8: Accounting for Intangibles

Explain the difference between an 'infinite life' and an 'indefinite life'.

Explain why intangible assets are required to be reported as a separate class of asset in the statement of financial position.

Purchased goodwill is recognised as the amount of:

IAS 38 states that intangible assets:

Discuss the benefits of subjecting goodwill to impairment testing as opposed to amortisation.In your answer,consider the relevance and faithfully represented qualitative characteristics of financial information.

Which of the following is not a directly attributable cost of research and development?

An intangible asset may be recorded:

Explain why research expenditures and expenditures on internally generated such as,brands,mastheads and publishing titles are not capitalised regardless of whether they are likely to generate future economic benefits.

The gain or loss on the disposal of an intangible asset is determined as the difference between:

Where a revaluation occurs,it is to be to the fair value of the asset.

Discuss the factors considered to determine amortisation of deferred development costs.

Internally generated identifiable intangible assets may be recognised for financial accounting purposes in Europe.

Continuously Contemporary Accounting (CoCoA)emphasises an entity's ability to adapt.Therefore goodwill is considered an important asset in this model.

An Overview of the International External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

An Overview of Accounting for Liabilities

Accounting for Leases

Share Capital, Reserves and Share Options Employee Bonus Schemes

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Income Taxes

The Statement of Cash Flows

Events Occurring After the Reporting Date

Related-Party Disclosures

Earnings Per Share

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues III: Accounting for Indirect Ownership Interest

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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