Concepts, Conventions, Definitions continued

Question 1

What are intangible assets?

Answer 1

A non-monetary asset without physical substance which must be identifiable, controlled and with a measurable cost

Question 2

Which of the following qualify as intangible assets:
1. Franchise agreements
2. Specialist staff skills
3. A portfolio of customers
4. Goodwill, brand names?

Answer 2

Yes, franchise agreements are identifiable and controlled
No, future actions of staff cannot be controlled
No, future actions of customers cannot be controlled
Only if bought from another company, otherwise cannot be measured

Question 3

What is a liability?

Answer 3

A liability is an obligation, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits for the recipient

Question 4

What are the degrees of certainty of types of liability?

Answer 4

1. Most certain, have a clear monetary value such as a bank loan
2. Slightly less certain may include bills not received as estimate is required
3. There is much less certainty for provisions, as there is less certainty about either amount or timing or both

Question 5

What is a provision?

Answer 5

A provision is a liability uncertain of timing or amount

Question 6

What is an asset?

Answer 6

An asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to arise
E.g. premises, IT equipment, stock, money in the bank