Chapter 12 - concepts

Question 1

Under IFRS, when goodwill should be tested for impairment?

Answer 1

Goodwill should be tested for impairment annually and whenever events or changes in circumstance indicate that impairment may have occurred.

Question 2

Goodwill was purchased when a business was acquired. When it is determined that the goodwill is impaired, the credit is usually made to…

Answer 2

an Accumulated Impairment Loss account.

Question 3

when is required rational entity impairment model?

Answer 3

For limited-life intangibles, IFRS requires that the rational entity impairment model be applied.

Question 4

A patent is an example of a(n)

Answer 4

technology-based intangible asset.

Question 5

The cost of purchasing patent rights for a product that might otherwise have seriously competed with one of the purchaser’s patented products should be…

Answer 5

amortized over the remaining estimated life of the original patent covering the product whose market would have been impaired by competition from the newly patented product.

Question 6

The cost of a patent should be amortized over its:

Answer 6

legal life or useful life, whichever is shorter.

Question 7

If the pattern in which an intangible asset’s benefits will be used up cannot be determined, the amortization method most likely to be used is

Answer 7

straight-line.

Question 8

The reason that the revaluation model is not widely used for measuring intangible assets after initial recognition is that

Answer 8

it can be applied only to intangible assets with a fair value determined in an active market.

Question 9

Intangible assets that have a finite life are amortized over a period not to exceed:

Answer 9

their useful life.

Question 10

When determining whether an internally developed intangible asset should be recognized, the process of generating the intangible is usually broken down into the

Answer 10

research and development phases.

Question 11

How do we measure purchased intangible assets

Answer 11

• Purchased intangible assets are measured at cost, which is their fair value at acquisition.
• The cost of the intangible received in a non-monetary exchange is the fair value of the consideration given or the fair value of the intangible received, whichever is more clearly evident.
• Cost includes the acquisition cost and all expenditures necessary to make the intangible asset ready for its intended use.

Question 12

Not all intangible assets are..

Answer 12

subject to amortization.

Question 13

IFRS

1. impairment for PPE and limited life intangibles
2. impairment for indefinite-life intangibles

Answer 13

1. assessed for indicators at THE END OF EACH REPORTING period
2. more strict: no assessing of INDICATORS for impairment , carrying amount and recoverable amount are compared at the end of each period

Question 14

ASPE - impairment test for indefinite life intangibles

Answer 14

(is significant different than the one for PPE AND limited-life intangibles) - is a fair value test, which is discounted cash flow concept - as opposed to undiscounted future cash flows