Goodwill & Intangibles

Question 1

IFRS Handbook

Answer 1

IAS 38

Question 2

Types of intangibles

Answer 2

patents
copyrights
franchise rights
customer lists

Question 3

Criteria to be an intangible asset

Answer 3

Must meet all of the following:

• The asset must be identifiable:
  a. Separable. ie able to sell to someone else
  b. Arising from contractual rights
• The entity must control the future economic benefits of the asset
• The asset will generate future economic benefits

Question 4

When to recognize an intangible

Answer 4

• It is probable that the expected future economic benefits of the asset will flow to the entity
• The costs can be measured reliably

Question 5

Costs to capitalize with intangible if purchased

Answer 5

• Cost to purchase intangible

- Costs to prepare asset for use

Question 6

Measurement of intangible purchased in business consolidation

Answer 6

• Fair value at acquisition date

Question 7

Measurement of Goodwill

Answer 7

Not considered an intangible as costs not reliable and asset is not identifiable
ONLY recorded if acquired in a business consolidation

Question 8

Measurement Internally generated intangible

Answer 8

Only development costs can be capitalized

Question 9

Criteria to be able to capitalize development costs

Answer 9

IAS 38.57

1. Is the asset technically able to be completed?
2. Does the entity plan to complete to use or sell?
3. Once completed does the entity have a use for the asset?
4. Will the asset generate economic benefits?
5. Does the company have the means to complete it?
6. Does the entity know the costs attributable? measurable?

Can only capitalize once all 6 have been met

Question 10

Expenses to capitalize as development

Answer 10

• Design prototypes
• Design new technology
• Materials-
• Direct labour and employee benefits
• Fees to register legal right
• Directly attributable OH’s
• Final product testing
• proprietary rights

Question 11

Expenses not to capitalize

Answer 11

• Selling, admin, general OH
• Inefficiencies, operating losses before asset achieves performance
• Staff training
• Research costs
• Salaries prior to 6 being met
• Market focus groups

Question 12

Subsequent measurement of intangibles

Answer 12

Finite life - over life of asset.

Residual = nil unless a third party committed to purchasing

Indefinite life - No amort but asses for impairment

Question 13

IFRS methods for subsequent

Answer 13

Cost = cost - amort - impairment
OR
Revaluation = Fair value - amort - impairment. RARELY USED.

Question 14

Calculate amort

Answer 14

Cost of intangible (less residual if commitment only) / useful life of asset

Question 15

Derecognition of intangible

Answer 15

When there is no more economic benefit being derived from the asset.

Record gain/loss between proceeds (if any) and carrying value

Question 16

ASPE Difference

Answer 16

May expense of capitalize development costs

IFRS MUST capitalize if meet all 6