Intangible Assets

Question 1

IFRS

Answer 1

• Investment property - building that the company is renting out as long as it is not using the building for its own operations
  
  • Internally Created Goodwill - cannot be recognized as an asset
  • Intangible assets within a class must be measured using the same model, different classes can use different models
  • Once a development project reaches the stage of a working model or prototype, and found to be technologically feasible, it can be capitalized with additional development costs added to its costs on the company books
    Ex - technologically feasible, but still going to develop it further, you may recognize and capitalize asset at this point anyway

Question 2

Intangible Asset

Answer 2

• Useful life is the period over which the asset is expected to contribute to future cash flows
  
  • Intangible asset cost should be amortized over the shorter of the legal or useful life
    Amortize for cost and not for the amount unamortized on other books

Question 3

Amortization/Capitalization of Computer Software

Answer 3

• Comp software developed or obtained for internal use shall be amortized on a straight line basis unless another systematic and rational basis is more representative of software’s use
  
  • Software cost - greater of ratio of
    ○ Current sales/ total sales
    ○ Straight line method over useful life of asset
  • At each BS date, unamortized capitalized costs of a computer software product shall be compared to the net realizable value of that product
    ○ Amount by which unamortized capitalized costs of a computer software product exceed NRV shall be written off
  • Computer software costs to be sold leased or otherwise marketed are changed to expense as R&D until technological feasibility has been established for the product
    Technological feasibility is established upon completion of a detailed program design or completion of a working model

Question 4

Goodwill

Answer 4

Purchase price exceeds the fair value of all the assets the purchased company owns

Question 5

Development Costs

Answer 5

Expensed as incurred regardless of the intangible asset in question

Question 6

Impairment

Answer 6

• Carry Value exceeds Fair Value
  ○ If not, then there is no impairment
  The amount that the Carry value exceeds fair value is reported as impairment

Question 7

Progress Billings

Answer 7

• Contra current asset account of costs and progress recognized so far on contract
  If Billings exceed the construction in progress, current liability exists

Question 8

Interest Expense

Answer 8

• Cash Interest + Decrease in Prepaid Interest - Decrease in Interest Payable
  
  • D Interest Expense
  • D Interest Payable
    ○ C Prepaid Interest
    Cash Paid