F2B - Chapter 8: Intangible assets

Question 1

What is an intangible asset?

Answer 1

An identifiable non-monetary asset without physical substance

Question 2

When is an asset identifiable?

Answer 2

Separable
Arises from contractual or other legal rights

Question 3

Why can internally generated intangible assets not be capitalised?

Answer 3

As they cannot be identified separately from the costs associated with running the business

Question 4

What are some examples of internally generated intangibles that can never be recognised?

Answer 4

Goodwill
Brands
Publishing titles
Newspaper mastheads
Customer lists
Intellectual property

Question 5

What should purchased intangibles be recognised at?

Answer 5

Cost
The cost includes the purchase price plus any directly attributable costs of preparing the asset for its intended use

Question 6

How do we account for intangible assets using the cost model?

Answer 6

Intangible asset should be carried at cost less amortisation and any impairment losses
This model is more commonly used in practice
Asset amortised over the useful life, with the annual expense showing in the SPL

Question 7

What if an intangible asset does not have an indefinite useful life?

Answer 7

Should not be amortised
Should be tested for impairment annually, and more often if there is an actual indication of possible impairment

Question 8

What should intangible assets be revalued at in the revaluation model?

Answer 8

Fair value

Question 9

When is an intangible asset derecognised?

Answer 9

On disposal
OR
When no future economic benefits are expected from it

Question 10

When should development expenditure be amortised?

Answer 10

Over its useful life as soon as commercial production begins