Chapter 8: SP - Intangible NCA Flashcards
1
Q
Goodwill - recognition (5)
impairment not in this FC
A
- Approval of acquisition in minutes of the board
- Agree consideration paid with bank statement, sale agreement, cash book
- Inspect due-diligence report for fair value of net assets and ensure completeness of such assets
- Recalculate the purchased goodwill
- Check disclosures
2
Q
Amortization/Impairment (5)
A
- Understand Management’s process
- Check annual impairment testing (& correctly)
- evaluate appropriateness of assumptions: professional judgement > comparision with industry
- Engage expert for assumptions, if necessary
- Obtain written representation that assumptions are reasonable
ensure FV = CA in books (agree)
3
Q
Assumptions for impairment (4)
A
sales volume
prices
operating cost
growth rate
4
Q
Development Cost (6)
A
- Criteria (PIRATE)
- Discuss feasibility of project with management
- Select sample of cost and check documents (Bills, timesheet, payroll sheet, supplier invoice, patent registration, development contracts)
- Review list of capitalized expenses for proper classification (doesnt include research exp that is sunk cost)
- Obtain representation about intention regarding the project
- Check amortization and impairment (possibilty of impairment subsequent to recognition)
5
Q
Things to check when assessing the feasibility of the project/product (3)
A
- Review projections and forecasts and consider if they are reasonable
- Assess production and marketing plans and whether such market exists
- Consider funding requirements for project
6
Q
Other Intangibles (e.g. purchase of Brand) (5)
A
- Approval of board in minutes for purchase
- Inspect legal and purchase documents for valuation, existence, and title of company
- discuss with mgmt determination of useful life
- check if amortization calculation is accurate using client’s policy (Recalculation)
- Discuss with management and review for possibility of impairment subsequent to recognition
