FAR 9 - INTANGIBLES Flashcards
Under IFRS, what valuation methods are used for intangible assets?
- the cost model
2. the revaluation model
In the development stages of a computer software program that will be sold to the general public, what costs are expensed when incurred?
all costs prior to achieving technological feasibility, such as costs to develop a working model, are expensed as incurred.
**Subsequent costs like customer support and training would be considered operating expenses
What is considered research and development for expense purposes?
research aimed at discovery of new knowledge with the hope that the new knowledge can be used in developing a new:
- product
- service
or - new process or technique
If a public company as many reporting units, does goodwill get tested in aggregate?
No, a pubic company will need to test for goodwill at least annually for each reporting included in its financial statements
What is a reporting unit?
A reporting unit is a group of assets, liabilities, and activities for which separate books and records are maintained
For intangible assets, after an impairment loss is recognized, can the impairment be subsequently reversed?
Absolutely not.
For intangibles, and under GAAP, once an impairment loss is recognized, the reduced carrying value is considered the new cost basis and is used for all future impairment tests.
Further reductions are recognized as additional impairments, but recoveries are not allowed
in a research and development project, what costs can be capitalized vs expensed?
Until technological feasibility is achieved, ALL costs incurred in the development of software is expensed when incurred.
once technological feasibility has been achieved, costs of producing masters and other costs are capitalized.
Under the revaluation model allowed for intangible assets under IFRS, how often are these assets revalued and are these assets amortized?
Under the revaluation model allowed for IFRS, intangible assets are PERIODICALLY revalued (required at least every 3 years, but not required annually) and adjusted to their fair values.
Yes, in between revaluation dates, the intangible asset is amortized and may be written down due to impairment
Upon determining that an intangible will generate cash flows indefinitely, do you continue to amortize this intangible?
No.
Upon determining that an intangible will generate cash flows indefinitely, the intangible would be considered an intangible with an indefinite useful life. This intangibles do not get amortized. Instead, they are tested for impairment at least annually
