Question 1

International convergence has meant that there is no longer one specific standard related to intangibles

Accepted Answer

A) True 
 B)False

Question 2

Which of the following expenses are likely to satisfy the definition of an asset,and hence may be capitalised as an intangible asset?

Accepted Answer

A) expenses incurred to develop a brand name 
B) advertising expenses 
C) research expenses 
D) none of the given answers

Question 3

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)

Question 4

Research of market potential prior to the launch of a product is permissible to be capitalised as an intangible asset.

Accepted Answer

A) True 
 B)False

Question 5

IAS 38 contains some elements that seem to be reactions to opportunistic behaviour by preparers of accounts and to the degree of uncertainty surrounding goodwill as an unidentifiable intangible asset.These elements include:

Accepted Answer

A) the prohibition on recording internally generated goodwill. 
B) the requirement to use a specific rate of amortisation. 
C) the specification of impairment testing. 
D) the prohibition on recording internally generated goodwill and the specification of impairment testing.

Question 6

The requirement of IAS 38 in relation to the amortisation of development cost is that:

Accepted Answer

A) It is to be amortised straight-line over a period not greater than 20 years. 
B) It is to be amortised from the time of deferral so as to match the cost to the related benefits. 
C) It is to be amortised using an accelerated depreciation rate over a period not exceeding 10 years. 
D) It is to be amortised from the time the asset is available for use and shall reflect the consumption of the economic benefits by the entity.

Question 7

According to IAS 38 on intangible assets,if an entity buys another entity separate values can be assigned to purchased goodwill and to a brand name.

Accepted Answer

A) True 
 B)False

Question 8

IAS 38 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 9

Discuss the considerations outlined in IAS 38 on revaluation of intangible assets.What are the implications of this standard on the relevance of financial information?

Accepted Answer

The answer of Discuss the considerations outlined in IAS 38...

Question 10

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 $$\begin{array} { | l | r | } 
\hline & \text { Carrying amount } \
\hline \text { Buildings } & 300000 \
\hline \text { Equipment } & 300000 \
\hline \text { Goodwill } & 20000 \
\hline \text { Total } & 620000 \
\hline
\end{array}$$ In accordance with IAS 36 Impairment of Assets,what is the appropriate journal entry to recognise the impairment loss for Shelley Beach Plc?

Accepted Answer

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

Question 11

An active market is defined in the standards as a market that has:

Accepted Answer

A) willing buyers and sellers. 
B) prices are publicly available. 
C) items traded are homogeneous. 
D) All of the given answers are necessary.

Question 12

Brighton Shores Plc 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 2014. $$\begin{array} { | l | r | r | } 
\hline & \text { Carrying amount } & \text { Recoverable amount } \
\hline \text { Buildings } & 800000 & 900000 \
\hline \text { Equipment } & 200000 & 150000 \
\hline \text { Goodwill } & 50000 & \
\hline
\end{array}$$ In accordance with IAS 36 Impairment of Assets what should be the carrying amount of buildings as at 30 June 2014?

Accepted Answer

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

Question 13

Which of the following statements in regard to goodwill is/are correct in accordance with IAS 36 Impairment of Assets?

Accepted Answer

A) Goodwill may be amortised when it has a finite life. 
B) Goodwill is subjected to impairment testing every three years. 
C) Upward revaluation of goodwill is permitted as long as it is a reversal of prior years' impairment losses. 
D) None of the given statements are correct.

Question 14

Which of the following statements is correct with respect to research and development expenditures in accordance with IAS 38?

Accepted Answer

A) Activities aimed at obtaining knowledge that is likely to produce a viable commercial product can be capitalised. 
B) Formulation, design, evaluation and final selection of alternative materials to be used in producing a viable commercial product can be capitalised. 
C) Design, construction and operation of a pilot plant that is not of a scale economically feasible for commercial production can be capitalised. 
D) Search for, evaluation and final selection of, applications of research findings and other knowledge can be capitalised.

Question 15

Explain how IAS 38 Intangible Assets may advantage European companies with heavy research and development activities.Contrast this with US companies.

Accepted Answer

The answer of Explain how IAS 38 Intangible Assets may...

Exam 8: Accounting for Intangibles

International convergence has meant that there is no longer one specific standard related to intangibles

Which of the following expenses are likely to satisfy the definition of an asset,and hence may be capitalised as an intangible asset?

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

Research of market potential prior to the launch of a product is permissible to be capitalised as an intangible asset.

IAS 38 contains some elements that seem to be reactions to opportunistic behaviour by preparers of accounts and to the degree of uncertainty surrounding goodwill as an unidentifiable intangible asset.These elements include:

The requirement of IAS 38 in relation to the amortisation of development cost is that:

According to IAS 38 on intangible assets,if an entity buys another entity separate values can be assigned to purchased goodwill and to a brand name.

IAS 38 permits the use of revaluation model for intangible assets if there is an active market to determine fair value.

Discuss the considerations outlined in IAS 38 on revaluation of intangible assets.What are the implications of this standard on the relevance of financial information?

An active market is defined in the standards as a market that has:

Which of the following statements in regard to goodwill is/are correct in accordance with IAS 36 Impairment of Assets?

Which of the following statements is correct with respect to research and development expenditures in accordance with IAS 38?

Explain how IAS 38 Intangible Assets may advantage European companies with heavy research and development activities.Contrast this with US companies.