Borrowing Costs, Intangibles, Impairment

Question 1

How does I AS 23 borrowing costs deal with the accounting for non-current assets?

Answer 1

In accordance with iOS 23 borrowing costs, borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset should be capitalised as part of the cost of that asset. All other borrowing costs should be recognised as an expense in the period in which they are incurred.

A qualifying asset is defined as being an ‘asset that necessarily takes a substantial period of time to get ready for its intended use’

Question 2

What disclosure is required under IAS 23 borrowing costs

Answer 2

I AS 23 borrowing costs requires the following disclosure requirements

one – the borrowing costs capitalised in the period,

two – the capitalisation rate used

Question 4

How does IAS 38 describe intangible assets?

Answer 4

IAS 38 describes an intangible asset as an identifiable non-monetary assets without physical substance. An asset is identifiable if it is both;

Separable

And

Arrives from contractual or other legal rights

Question 5

What are the two criteria which must be met for an intangible asset to be recognised per I AS 38?

Answer 5

And intangible assets should only be recognised if;

It is probable that The future economic benefits that are attributable to the asset will flow to the enterprise and

The cost of the acid can be measured reliably

Question 6

How should the following internally generated intangible assets be recognised in the financial statements?

Goodwill, brands, publishing titles, customer lists?

Answer 6

These internally generated intangible assets may never be recognised

Question 7

Describe the circumstances under which purchased intangible assets could be recognised in the financial statements?

Answer 7

One – separately, record at cost if recognition criteria met

Two – as part of a business combination. Record at fair value assuming asset is identifiable and fair value is reliable otherwise included in goodwill

Question 8

Describe the differences between research and development for accounting purposes?

Answer 8

Research is classed as investigation undertaken to gain new knowledge and understanding.

Development is the application of research findings are all the knowledge to produce new or substantially improved products.

Question 9

How should research costs be treated?

Answer 9

Expenditure to be recognised as an expense when incurred

Question 10

How should development costs be treated?

Answer 10

Capitalise of the following criteria are met;

P - robable future benefits
I - intend to complete
R - eliable measurement of costs
A - vailable resources 
T - technically feasible
S - sellable/useable product

If criteria not meet, treat as an expense