Intangible assets - F2

Question 1

What are intangible assets?

Answer 1

identifiable non-monetary asset without physical substance.

Question 2

What do intangible assets include?

Answer 2

• licences and quotas
• intellectual property
• brand names
• trademarks

Question 3

When is an asset identifiable?

Answer 3

An asset is identifiable if it is either separable or arises from contractual or other legal rights.

Question 4

When would an asset be recognised in the financial statements?

Answer 4

To be recognised in the financial statements an asset must meet the definition of an intangible asset and the recognition criteria.

Question 5

What intangibles can never be recognised?

Answer 5

• Goodwill
• Brands
• Publishing titles
• Newspaper mastheads
• Customer lists
• Intellectual property

Question 6

What should purchased intangibles be recognised as?

Answer 6

At cost, which could be cash or the fair value of shares given in exchange.

Question 7

What should intangibles purchase seperately be capatalised as?

Answer 7

Cost

Question 8

What should intangible assets acquired within a business combination be capatalised as?

Answer 8

Intangibles acquired within a business combination that can be measured reliably on initial recognition should be capitalised separately from purchased goodwill.

Question 9

IAS 38 intangible assets, the cost of the asset comprises of what?

Answer 9

Price to purchase
Any directly attributable cost of preparing the asset for its intended purpose

Question 10

What costs are not directly attributable to intangible assets?

Answer 10

Costs of introducing a new product or service
Costs of conducting business in a new location or with a new class of customer
Admin and other general overhead costs

Question 11

What are the two models to account for intangible assets?

Answer 11

Cost model
Revaluation model

Question 12

What is a cost model?

Answer 12

• Intangible asset should be carried at cost less amortisation and any impairment losses
• Model is more commonly used in practice
• Amortised over useful life, with annual expense shown in P&L
• If it has a finite useful life must be amortised over that life, straight line method with a zero residual value
• If it has an indefinite useful life it should not be amortised, should be tested for impairment annually

Question 13

If intangibles are revalues to their fair value what would determine it?

Answer 13

Active market

Question 14

When does an active market exist?

Answer 14

• Items traded in market are homogenous
• Willing buyers and sellers can be found at any time
• Prices are available to the public

Question 15

When is intangibles derecognised?

Answer 15

Intangibles are derecognised on disposal or when no future economic benefits are expected from it.