Intangible Assests Flashcards
Which costs can a development stage enterprise defer/amortize in the stage of no significant revenue?
The costs that can be recovered in future periods.
There is not difference in accounting treatment of established enterprise and development stage enterprise governing the capitalization of the costs.
How is the length of life assigned to an intangible asset?
It is the shorter of legal life or useful life.
Which intangible assets are amortized?
Only the ones with definite useful life. However all IAs are impaired and are checked for impairment on an annual basis
Are the organization expense of IAs expensed or amortized?
They are expensed since they are internally generated.
Typically only costs paid to outside parties are amortized.
How is the increase in the surrender value of a life insurance policy treated?
The increase in surrender value in any year is treated as a deduction from the premium in computing insurance expense for the year.
How is the proceed collected as a beneficiary of a life insurance policy treated?
The excess of proceeds minus the surrender value is treated as revenue.
What are deficits in context of development stage enterprise?
The deficit referred to in the question is negative retained earnings, resulting from operating losses during the start-up phase of the business. The deficit would be reported as a negative retained earnings balance, part of owners’ equity.
What is the difference between FS of development stage enterprise and established enterprise?
All financial statements same as statements for established firms,
with the additional requirement that cumulative amounts must also be shown.
The cumulative amounts indicate the direction the firm is taking and helps users assess the risk of such enterprises.
What is the capitalized cost of an definite IA under IFRS?
The capitalizable costs for an intangible asset under IFRS 38 are essentially the same as U.S. GAAP. The cost of the asset is the cash paid to acquire the asset, including the cost to obtain legal title and control of the asset.
How is goodwill calculated?
Goodwill can be computed directly as the present value of excess earnings. Goodwill is then added to the market value of net identifiable assets to yield the purchase price. Excess earnings is the difference between B’s earnings and the expected earnings in B’s industry for a firm the size of B, based on market value of net assets.
What is Pre-Step Test for checking impairment of Goodwill?
Goodwill impairment testing permits a qualitative “pre-step” test to determine if it is more likely than not that the goodwill is impaired. This pre-step can result in considerable savings to companies who do not have to complete the quantitative tests associated with testing and measuring goodwill impairment.
What is Goodwill?
Goodwill is the portion of the purchase price not attributable to identifiable assets.
Purchase price - MV of Net Assets = Goodwill
Net Assets = Total Assets - Total Liabilities.
Goodwill should be tested for value impairment at which of level?
Reporting Unit
What is the test of impairment of IA according to IFRS?
Carrying Value-Recoverable Amount
Recoverable Amount = The greater of FV less cost to sell or the value in use.
At what level is goodwill is tested under IFRS?
At cash generating unit level or grp of cash generating unit level
