Question 1

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  B

Question 2

AASB 138 requires that all intangibles,whether purchased or internally generated,be capitalised.

Accepted Answer

A) True 
 B)False  False

Question 3

In order to determine whether or not expenditure should be treated as an intangible asset,the relevant test to apply in Australia is:

Accepted Answer

A)   It should be recognised when (a)  it is definite that future economic benefits will eventuate or (b)  the asset possesses a cost or other value that can be measured reliably.
B)   It should be recognised if (a)  the expenditure is with an external party in an arm's length transaction for a separately identifiable intangible asset or (b)  the intangible asset arises as the difference between the net tangible assets of an entity and the price paid for that entity.
C)   It should be recognised if (a)  it is part of a specified plan by management to develop and maintain a separately identifiable asset or (b)  the intangible asset was purchased in an arm's length transaction and is actively traded in a market.
D)   It should be recognised when and only when (a)  it is probable that future economic benefits will eventuate and (b)  the asset possesses a cost or other value that can be measured reliably. D

Question 4

AASB 138 defines development as:

Accepted Answer

A)   the activities undertaken with specific commercial objectives, including original research, to develop plans or designs for new products or significant improvements to existing products.
B)   the application of research findings or other knowledge to a plan or design for the production of new or substantially improved material, devices, processes, systems or services prior to the commencement of commercial production or use.
C)   the activities undertaken to translate research findings into feasible projects for subsequent development for commercial objectives such that the recoverable amount is expected to be greater than the cost.
D)   the activities undertaken with the expectation by management that future economic benefits in the form of new products or improvements to existing products are likely to result, based on research completed to date.

Question 5

Discuss the concerns held by Australia corporate executives on the amortisation of intangibles prior to Australia's 2005 adoption of IFRS.

Accepted Answer

The answer of Discuss the concerns held by Australia corporate...

Question 6

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: $$\begin{array} { | l | r | r | r | r | } 
\hline \text { (in dollars) } & \text { Goodwill } & \begin{array} { c } 
\text { Accumulated } \
\text { impairment loss }
\end{array} & \begin{array} { c } 
\text { Carrying amount } \
\text { of CGU }
\end{array} & \begin{array} { c } 
\text { Recoverable amount } \
\text { of CGU }
\end{array} \
\hline \text { Mantra Ltd } & 50000 & 10000 & 250000 & 270000 \
\hline \text { Oceania Ltd } & 40000 & \text { Nil } & 310000 & 250000 \
\hline \text { Wave Ltd } & 60000 & \text { Nil } & 450000 & 600000 \
\hline
\end{array}$$ What is the carrying amount of goodwill as at 30 June 2009 consistent with AASB 136 Impairment of Assets?

Accepted Answer

A)   Zero
B)   $100 000
C)   S140 000
D)   $150 000

Question 7

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.

Question 8

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

Accepted Answer

The answer of Explain the difference between an 'infinite life'...

Question 9

AASB 138 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.

Question 10

Discuss the considerations outlined in AASB 138 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 AASB 138...

Question 11

After initial recognition,the acquirer shall recognise goodwill at:

Accepted Answer

A)   historical cost.
B)   fair value.
C)   cost less accumulated amortisation.
D)   cost less accumulated impairment losses.

Question 12

AASB 138 prohibits the recognition of intangible assets using the revaluation model.

Accepted Answer

A) True 
 B)False

Question 13

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 2 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 14

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 15

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

The answer of Discuss the benefits of subjecting goodwill to...

Question 16

Intangible assets that are amortised are no longer subjected to impairment testing.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

AASB 138 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 19

Which of the following statement(s)in regard to goodwill is/are correct in accordance with AASB 136 Impairment of Assets?

Accepted Answer

A)   An impairment loss must be recognised when the carrying amount of a cash-generating unit exceeds its recoverable amount.
B)   An impairment loss recognised for goodwill shall not be reversed in a subsequent period.
C)   Value in use is the present value of future cash flows expected to be derived from a cash-generating unit.
D)   All of the given statements are correct.

Question 20

Internally generated brands,mastheads,publishing titles and customer lists are permitted to be recognised as intangible assets.

Accepted Answer

A) True 
 B)False

Exam 8: Accounting for Intangibles

AASB 138 requires that all intangibles,whether purchased or internally generated,be capitalised.

In order to determine whether or not expenditure should be treated as an intangible asset,the relevant test to apply in Australia is:

AASB 138 defines development as:

Discuss the concerns held by Australia corporate executives on the amortisation of intangibles prior to Australia's 2005 adoption of IFRS.

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

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

AASB 138 states that intangible assets:

Discuss the considerations outlined in AASB 138 on revaluation of intangible assets.What are the implications of this standard on the relevance of financial information?

After initial recognition,the acquirer shall recognise goodwill at:

AASB 138 prohibits the recognition of intangible assets using the revaluation model.

Purchased goodwill is recognised as the amount of:

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

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.

Intangible assets that are amortised are no longer subjected to impairment testing.

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

AASB 138 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:

Which of the following statement(s) in regard to goodwill is/are correct in accordance with AASB 136 Impairment of Assets?

Internally generated brands,mastheads,publishing titles and customer lists are permitted to be recognised as intangible assets.