Question 1

The cost of a separately acquired intangible asset includes its purchase price and directly attributable cost for preparing the asset for its intended use.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following intangible assets should be recognised in the statement of financial position?

Accepted Answer

A)  internally generated goodwill in excess of recoverable amount 
B)  licences with active market 
C)  purchased trademark 
D)  licences with active market and purchased trademark 
A)  internally generated goodwill in excess of recoverable amount 
B)  licences with active market 
C)  purchased trademark 
D)  licences with active market and purchased trademark

Question 3

Shelley Beach Ltd 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 2012. The carrying amounts of the assets as at 30 June 2012 are as follows $$\begin{array} { | l | r | } 
\hline & \text { Carrying amount } \
\hline \text { Buildings } & 300000 \
\hline \text { Equipment } & 300000 \
\hline \text { Goodwill } & \underline { 20000 } \
\hline \text { Total } & \underline { 620000 } \
\hline
\end{array}$$ In accordance with AASB 136 Impairment of Assets,what is the appropriate journal entry to recognise the impairment loss for Shelley Beach Ltd?

Accepted Answer

A) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Impairment loss } & 80000 & \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-buildings } & & 30000 \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-equipment } & & 30000 \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-goodwill } & & 20000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Impairment loss-identifiable intangible assets } & 80000 & \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-buildings } & & 40000 \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-equipment } & & 40000 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | c | l | r | r | } 
\hline \mathrm { Dr } & \text { Impairment loss-identifiable intangible assets } & 60000 & \
\hline \mathrm { Dr } & \text { Impairment loss-goodwill } & 20000 & \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-buildings } & & 30000 \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-equipment } & & 30000 \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-goodwill } & & 20000 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Impairment loss } & 80000 & \
\hline \mathrm { Cr } & \text { Buildings } & & 30000 \
\hline \mathrm { Cr } & \text { Equipment } & & 30000 \
\hline \mathrm { Cr } & \text { Goodwill } & & 20000 \
\hline
\end{array}$$ 
A) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Impairment loss } & 80000 & \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-buildings } & & 30000 \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-equipment } & & 30000 \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-goodwill } & & 20000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Impairment loss-identifiable intangible assets } & 80000 & \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-buildings } & & 40000 \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-equipment } & & 40000 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | c | l | r | r | } 
\hline \mathrm { Dr } & \text { Impairment loss-identifiable intangible assets } & 60000 & \
\hline \mathrm { Dr } & \text { Impairment loss-goodwill } & 20000 & \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-buildings } & & 30000 \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-equipment } & & 30000 \
\hline \mathrm { Cr } & \text { Accumulated impairment loss-goodwill } & & 20000 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Impairment loss } & 80000 & \
\hline \mathrm { Cr } & \text { Buildings } & & 30000 \
\hline \mathrm { Cr } & \text { Equipment } & & 30000 \
\hline \mathrm { Cr } & \text { Goodwill } & & 20000 \
\hline
\end{array}$$

Question 4

Which of the following combination best demonstrates the value of goodwill?
I.purchase consideration of subsidiary
II.book value of net assets held by subsidiary
III.fair value of net identifiable assets
IV.contingent liabilities

Accepted Answer

A)  I less II 
B)  I less III 
C)  I less (II-IV) 
D)  I less (III-IV) 
A)  I less II 
B)  I less III 
C)  I less (II-IV) 
D)  I less (III-IV)

Question 5

During 2001 the Financial Accounting Standards Board in the United States indicated they would look to change a requirement for the treatment of goodwill.That change is:

Accepted Answer

A)  to remove the requirement to amortise goodwill and replace it with a requirement to write down goodwill to reflect any impairment in value. 
B)  to allow the recognition of internally generated goodwill. 
C)  to extend the period over which goodwill may be amortised. 
D)  to allow the inverted sum-of-digits method of amortisation. 
A)  to remove the requirement to amortise goodwill and replace it with a requirement to write down goodwill to reflect any impairment in value. 
B)  to allow the recognition of internally generated goodwill. 
C)  to extend the period over which goodwill may be amortised. 
D)  to allow the inverted sum-of-digits method of amortisation.

Question 6

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

Research expenditures and expenditures o

Question 7

If the fair value of a revalued intangible asset can no longer be determined by reference to an active market,AASB 136 requires the use of the cost model.

Accepted Answer

A) True 
 B)False

Question 8

Explain how AASB 138 Intangible Assets may advantage Australian companies with heavy research and development activities.Contrast this with US companies.

Accepted Answer

AASB 138 Intangible Assets provides spec

Question 9

Earth Ltd acquired Moon Ltd on 1 July 2009 for the sum of $100 000.On the same date Moon Ltd has the following assets and liabilities: $$\begin{array} { | l | r | r | r | } 
\hline & \mathbf { Carrying amount } & \mathbf { Recoverable~ amount } & \mathbf { Fair~ value } \
\hline \mathbf { Assets: } & & & \
\hline \text { Land } & 100000 & 130000 & 150000 \
\hline \text { Machinery } & 50000 & 30000 & 40000 \
\hline \text { Cash } & 20000 & & \
\hline\mathbf {Liabilities: } & & & \
\hline \text { Loan } & 105000 & & \
\hline \text { Contingent liabilities } & 80000 & & \
\hline
\end{array}$$ 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 10

Examples of elements of a business that commonly make up goodwill are:

Accepted Answer

A)  patents and licences. 
B)  trademarks and brand names. 
C)  research and development. 
D)  established reputation and loyal customers. 
A)  patents and licences. 
B)  trademarks and brand names. 
C)  research and development. 
D)  established reputation and loyal customers.

Question 11

Because intangible assets have no physical form:

Accepted Answer

A)  They are not subject to the recognition criteria of other assets and may be recorded if they satisfy the three elements of the definition. 
B)  They must be expensed immediately, as assets must be able to be measured. 
C)  They have no real value and should be excluded from accounting reports. 
D)  None of the given answers are correct. 
A)  They are not subject to the recognition criteria of other assets and may be recorded if they satisfy the three elements of the definition. 
B)  They must be expensed immediately, as assets must be able to be measured. 
C)  They have no real value and should be excluded from accounting reports. 
D)  None of the given answers are correct.

Question 12

Broadbeach Ltd is a manufacturing company with three subsidiaries.The following information relates to the goodwill account of Broadbeach Ltd for the year ended 30 June 2009. $$\begin{array} { | l | r | r | r | r | } 
\hline & \text { Goodwill } & \begin{array} { c } 
\text { Accumulated } \
\text { impairment loss }
\end{array} & \begin{array} { c } 
\text { Carrying amount } \
\text { of CGU }
\end{array} & \begin{array} { c } 
\text { Recoverable amount } \
\text { of CGU }
\end{array} \
\hline \text { Mantra Ltd } & 50000 & 10000 & 250000 & 270000 \
\hline \text { Oceania Ltd } & 40000 & \text { Nil } & 310000 & 250000 \
\hline \text { Wave Ltd } & 60000 & \text { Nil } & 450000 & 600000 \
\hline
\end{array}$$ In accordance with AASB 136,what is the net effect of above goodwill accounts on the statement of comprehensive income and statement of financial position of Broadbeach Ltd?

Accepted Answer

A) 
$\begin{array}{|l|l|}
\hline
\begin{array}{l}
\text { Statement of comprehensive } \
\text { income }
\end{array} & \begin{array}{l}
\text { Statement of financial } \
\text { position }
\end{array} \
\hline \text { Increase } & \text { Increase }\
\hline
\end{array}$ 
B) 
$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Statement of comprehensive } \
\text { income }
\end{array} & \begin{array} { l } 
\text { Statement of financial } \
\text { position }
\end{array} \
\hline \text { Decrease } & \text { Decrease } \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Statement of comprehensive } \
\text { income }
\end{array} & \begin{array} { l } 
\text { Statement of financial } \
\text { position }
\end{array} \
\hline \text { Increase } & \text { Decrease } \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Statement of comprehensive } \
\text { income }
\end{array} & \begin{array} { l } 
\text { Statement of financial } \
\text { position }
\end{array} \
\hline \text { Decrease } & \text { Increase } \
\hline
\end{array}$$ 
A) 
$\begin{array}{|l|l|}
\hline
\begin{array}{l}
\text { Statement of comprehensive } \
\text { income }
\end{array} & \begin{array}{l}
\text { Statement of financial } \
\text { position }
\end{array} \
\hline \text { Increase } & \text { Increase }\
\hline
\end{array}$ 
B) 
$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Statement of comprehensive } \
\text { income }
\end{array} & \begin{array} { l } 
\text { Statement of financial } \
\text { position }
\end{array} \
\hline \text { Decrease } & \text { Decrease } \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Statement of comprehensive } \
\text { income }
\end{array} & \begin{array} { l } 
\text { Statement of financial } \
\text { position }
\end{array} \
\hline \text { Increase } & \text { Decrease } \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Statement of comprehensive } \
\text { income }
\end{array} & \begin{array} { l } 
\text { Statement of financial } \
\text { position }
\end{array} \
\hline \text { Decrease } & \text { Increase } \
\hline
\end{array}$$

Question 13

Goodwill is a term used for the composite asset of identifiable intangibles.

Accepted Answer

A) True 
 B)False

Question 14

AASB 138 permits the use of revaluation model for intangible assets if there is an active market to determine fair value.

Accepted Answer

A) True 
 B)False

Question 15

Development costs are less likely to meet the test for deferral than research costs.

Accepted Answer

A) True 
 B)False

Question 16

Palm Beach Ltd has a cash generating unit (CGU)and has been assessed for impairment and it has determined an impairment loss of $100 000. The following information relates to the assets as at 30 June 2012. $$\begin{array} { | l | r | r | } 
\hline & \text { Carrying amount } & \text { Recoverable amount } \
\hline \text { Buildings } & 800000 & 900000 \
\hline \text { Equipment } & 200000 & 150000 \
\hline \text { Goodwill } & 50000 & \
\hline
\end{array}$$ In accordance with AASB 136 Impairment of Assets what should be the carrying amount of buildings as at 30 June 2012?

Accepted Answer

A)  $720 000 
B)  $760 000 
C)  $800 000 
D)  $900 000 
A)  $720 000 
B)  $760 000 
C)  $800 000 
D)  $900 000

Question 17

The revaluation model requires all intangible assets in the same class to have a fair value determined by reference to an active market.

Accepted Answer

A) True 
 B)False

Question 18

Identifiable intangible assets are those intangible assets that:

Accepted Answer

A)  have been purchased by the entity from external parties. 
B)  have an unlimited life. 
C)  can have a value placed on them separately from other assets of the entity. 
D)  cannot be separately sold. 
A)  have been purchased by the entity from external parties. 
B)  have an unlimited life. 
C)  can have a value placed on them separately from other assets of the entity. 
D)  cannot be separately sold.

Question 19

The release of AASB 138 has had what impact on the methods of amortising goodwill?

Accepted Answer

A)  The choice to use the inverted sum-of-digits method was phased out over a period of 15 years, to be replaced by straight-line depreciation. 
B)  The option to amortise goodwill was removed and replaced with annual impairment testing. 
C)  Entities were given the option of continuing to amortise goodwill or to subject it to impairment testing each year. 
D)  All entities were required to amortise goodwill over 20 years using the straight-line method to allow comparisons. 
A)  The choice to use the inverted sum-of-digits method was phased out over a period of 15 years, to be replaced by straight-line depreciation. 
B)  The option to amortise goodwill was removed and replaced with annual impairment testing. 
C)  Entities were given the option of continuing to amortise goodwill or to subject it to impairment testing each year. 
D)  All entities were required to amortise goodwill over 20 years using the straight-line method to allow comparisons.

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

Exam 8: Accounting for Intangibles

The cost of a separately acquired intangible asset includes its purchase price and directly attributable cost for preparing the asset for its intended use.

Which of the following intangible assets should be recognised in the statement of financial position?

Which of the following combination best demonstrates the value of goodwill? I.purchase consideration of subsidiary II.book value of net assets held by subsidiary III.fair value of net identifiable assets IV.contingent liabilities

During 2001 the Financial Accounting Standards Board in the United States indicated they would look to change a requirement for the treatment of goodwill.That change is:

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.

If the fair value of a revalued intangible asset can no longer be determined by reference to an active market,AASB 136 requires the use of the cost model.

Explain how AASB 138 Intangible Assets may advantage Australian companies with heavy research and development activities.Contrast this with US companies.

Earth Ltd acquired Moon Ltd on 1 July 2009 for the sum of $100 000.On the same date Moon Ltd has the following assets and liabilities: Land 100000 130000 150000 Machinery 50000 30000 40000 Cash 20000 Loan 105000 Contingent liabilities 80000 What is the value of goodwill,if any?

Examples of elements of a business that commonly make up goodwill are:

Because intangible assets have no physical form:

Goodwill is a term used for the composite asset of identifiable intangibles.

AASB 138 permits the use of revaluation model for intangible assets if there is an active market to determine fair value.

Development costs are less likely to meet the test for deferral than research costs.

The revaluation model requires all intangible assets in the same class to have a fair value determined by reference to an active market.

Identifiable intangible assets are those intangible assets that:

The release of AASB 138 has had what impact on the methods of amortising goodwill?

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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