CH5 Intangibles

Question 1

Definition of an intangible asset?

Answer 1

Identifiable, non-monetary asset without physical substance

Question 2

Identifiability?

Answer 2

If it arises from the legal right to use it (it has been bought) and/or it is separable (ie. you can sell it and continue trading).

Question 3

Recognition?

Answer 3

1. Probable that future economic benefits will flow AND
2. Cost can be measured reliably (internally generated: NO; ones you have bought: YES)

Question 4

Can you revalue intangible assets?

Answer 4

Technically, yes, but in reality, not really since you need an ‘active market’

Question 5

Intangible assets may have a finite useful life or an…?

Answer 5

INDEFINATE UL

Question 6

If an intangible asset has a indefinite UL, what do you amortisation wise?

Answer 6

ANNUALLY review for impairment

Question 7

How do you check for impairment?

Answer 7

Compare CV to RA (HIGHER of ViU and FVLCTS)

Question 8

What can NEVER be treated as intangible assets? Where should they go?

Answer 8

Advertising
Training
Marketing
Relocation
Reorganisation costs

Charge straight to PorL

Question 9

Can you amortise purchased goodwill?

Answer 9

NO!! you should annually review for impairment

Question 10

Can you capitalise research costs?

Answer 10

NO

Question 11

Can you capitalise development costs? What are the criteria?

Answer 11

Yes, you MUST, but only if certain criteria are met.

PIRATE!!
PROBABLE future economic development
INTENTION to complete
RESOURCES available (expertise/cash)
ABILITY to use or sell
TECHNICALLY feasible
EXPENDITURE has to be MEASUREABLE

Question 12

When do you start amortising development costs?

Answer 12

Commence when ‘available for use’ i.e. when development is completed

Question 13

Format of intangible assets note?

Answer 13

Along top - classes of assets eg. intangible A, intangible B

Down:

Cost
Start of year
Additions
Disposals
End of year

Accumulated AMORTISATION
Start of year
Charge for year
Disposals
End of year

Carrying vale (closing)
Carrying value (opening)

Question 14

Intangible assets: difference between IFRS and UK GAAP

Answer 14

IFRS: You MUST capitalise development that meets the criteria

Intangible assets CAN have an indefinite UL

UK GAAP:
Choice of whether to capitalise development costs or not.

ALL intangible assets (inc goodwill) are amortised. Assumed to have a finite life not exceeding 10 years (unless unusual circs)