3 Flashcards
Assume a private firm elects to adopt ASU 2014-08: Business Combinations: Accounting for Intangible Assets in a Business Combination. Can customer names and noncompetition be included as part of goodwill?
This answer is correct. ASU 2014-18 allows private firms, in a business combination, to measure customer-related intangible assets and noncompetition agreements as part of goodwill.
If a company constructs a laboratory building to be used as a research and development facility, the cost of the laboratory building is matched against earnings as
The costs of equipment and facilities that are used for R&D activities and have alternative future uses, whether for other R&D projects or otherwise, are to be capitalized as tangible assets when acquired or constructed. The depreciation of a facility such as a laboratory building used for R&D is an R&D expense.
The guidance for software revenue recognition applies to determination of the amounts and timing of revenue recognition that is not incidental to another product or service as a whole. Under this guidance, if a software arrangement requires significant production, modification, or customization, what is the usual method of accounting?
The accounting for long-term construction contracts (percentage-of-completion method or completed-contract method, as appropriate) ordinarily should be used. Thus, separate accounting for different elements is not permitted unless an exception applies.
Partnership A advances $1 million to Corporation B to perform research and development. The terms of the agreement specify that B must repay the funds upon successful completion of the project.
Question: 10 Corporation B accounts for the $1 million as
If the entity is obligated to repay any of the funds advanced by the other party regardless of the outcome of the project, it recognizes a liability. If repayment depends solely on the results of the R&D having future economic benefit, the entity accounts for its obligation as a contract to perform R&D for others. Given that B must repay only on successful completion of the project, the advance should be recorded as deferred contract revenue.
A research and development activity for which the cost is expensed as incurred is
Research is defined as planned search or critical investigation aimed at discovery of new knowledge with the hope that it will be useful in developing a new product, service, process, or technique, or in bringing about a significant improvement to an existing product, service, process, or technique. Development is defined as a translation of research findings or other knowledge into a plan or design for a new or improved product or process. It includes conceptual formulation, design, and testing of product alternatives; prototype construction; and operation of pilot plants. R&D costs are required to be expensed as incurred.
What amount should Heller report as research and development costs in its income statement for the year ended December 31, Year 1?
The costs of laboratory research aimed at discovery of new knowledge, testing for evaluation of new products, and R&D conducted by others on behalf of the enterprise are included in R&D costs and are therefore expensed as incurred.
Direct response advertising costs are capitalized to provide an appropriate expense in each period for
Direct response advertising costs are capitalized if the primary purpose is to make sales to customers who respond specifically to the advertising and probable future economic benefits result. An entity that capitalizes these costs must document that customers have specifically responded to the advertising. It also must document the benefits from prior direct response advertising. The deferral of advertising costs is appropriate for both interim and year-end financial reporting if their benefits clearly apply to more than one period. Moreover, if a cost that would be fully expensed in an annual report benefits more than one interim period, it may be allocated to those interim periods
An entire acquired entity is sold. The goodwill remaining from the acquisition should be
When a reporting unit is disposed of in its entirety, goodwill of that reporting unit (to the extent an impairment loss has not been recognized) is included in the carrying amount of the reporting unit to determine the gain or loss on disposal. Consequently, the unimpaired goodwill of each reporting unit of the acquired entity is included in the total carrying amount of that entity.
Which of the following is not classified as R&D?
Seasonal or other periodic design changes to existing products are activities not classified as R&D.
In one of a company’s reporting units, both an asset group and the goodwill are being tested for impairment. Which of the following statements is correct regarding impairment testing and impairment losses?
If goodwill and another asset group of a reporting unit are tested for impairment simultaneously, the other asset group must be tested for impairment before goodwill. If the asset group was impaired, the impairment loss would be recognized prior to goodwill being tested for impairment.
Which of the following is a research and development cost?
Research is defined as planned search or critical investigation. It is aimed at discovery of new knowledge with the hope that it will be useful in (1) developing a new product, service, process, or technique or (2) in bringing about a significant improvement in an existing product, service, process, or technique. Development is defined as a translation of research findings or other knowledge into a plan or design for a new or improved product or process.
