7 - Accounting for Other Assets Flashcards
What is the recognition criteria for an intangible asset?
it is probable that the expected future economic benefits attributed to the asset will flow to the entity and the cost of the asset can be measured reliably
What is internally generated good will?
When customers places repeat orders as a result of good customer service. However this goodwill cannot be recognised in the accounts because it cannot be reliably measured
What is research and can it be capitalised?
The original investigation undertaken to gain new scientific or technical knowledge. It cannot be capitalised and must be expensed instead as there is no certainty that the project will generate any future economic benefit. It is only experimental/theoretical
What is development?
The application of initial research findings to a plan or design for the production of new or substantially improved materials, devices, products, processes or systems prior to commercial production to use
What is are the criteria needed to capitalise development (PIRATE)?
P - Probable future economic benefits will be generated from the asset
I - Intention to complete and use/sell the asset
R - Resources are adequate and available to complete and use/sell the asset
A - Ability to use/sell the asset
T - Technical feasibility of completing the asset for use/sale
E - Expenditure can be measured reliably
(If the development expenditure fails on even just one of the above, it cannot be capitalised and must be expensed instead)
Can brand names, customer list or publishing titles be capitalised?
No
What is an impairment loss?
The amount by which the carrying amount of an asset exceeds it recoverable amount
What the recoverable amount of an asset?
the value of an asset and is calculated at the higher of the value in use and its fair value less costs to sell
What is the use value of an asset?
The present value if future cash flows to be generated through the use of an asset
How should inventories be recognised on the accounts?
At the lower of cost and net realisable value (this is done on a line by lines basis and not as a whole)
Is LIFO stock valuation allowed by IAS2?
No
