Week 3

Question 1

Depreciation Charge double entry

Answer 1

Debit Depreciation Charge (SoCI)
Credit Accumulated depreciation (SoFP)

Question 2

Investment Properties

Answer 2

Can be recorded through the cost model (cost of purchase) or the fair value model (cost + increase in value).

If using the fair value model, any incremental increase must be recorded in profit or loss

Question 3

intangible asset def.
& 4 characteristics

Answer 3

defined by IAS 38 as “an identifiable nonmonetary asset without physical substance”.
Key aspects for recognition:
* Identifiability;
* Control;
* Future economic benefits are expected to flow to the entity;
* Reliable measurability - Where an intangible resource is purchased, the criterion of reliable measurement is automatically satisfied; it’s the purchase
consideration agreed for that item.

Intangible assets are initially measured at cost

Question 4

Amortising Intangible Assets

Answer 4

As with tangible assets, intangible assets should be amortised in a way
that matches the pattern of economic benefits expected to flow from them;
Residual value should be zero unless there is an active market for the intangible asset or there’s a commitment from a third party to buy the asset.

Question 5

Reassessing intangible assets

Answer 5

An entity shall assess at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the entity shall estimate the recoverable amount of the asset

Question 6

Impairment loss for cash generating asset

Answer 6

First reduce the amount of any goodwill allocated to the cash-generating unit

Then to the other assets of the unit

Question 7

Non-current assets held for resale (Assets that aren’t intended to use, only sell)
3

Answer 7

No depreciation of the asset

Have a Held for Sale section under the non-current assets section of SoFP

Measured at the lower of carrying amount and fair value minus costs to sell

Question 8

Is it an Intangible Asset or not? Examples (from practice Q)

Answer 8

Brand name: a separable intangible asset with a reliable measurement, which should be separately recognised in the group accounts.

Confidentiality agreements - Although confidentiality agreements are not separable (you can’t
sell them to somebody else), they do give rise to a distinct set of
legally enforceable rights. Thus, they are an identifiable resource controlled by the group, with a reliable measurement, and should be separately recognised

Internally-developed computer software - Computer software is a separable intangible asset with a reliable
measurement, which should be separately recognised in the group accounts.

Patents - Patents are separable intangible assets, which should be separately recognised in the group accounts

Team of highly-skilled staff - Although a team of highly-trained staff is an identifiable resource,
no control arises; your staff may leave whenever they wish. Thus,
human resources do not qualify for recognition as a separate asset;
rather, the payment to access that highly skilled team is effectively
a part of goodwill

Value of high market share - Although having a high market share is valuable, no control 1 arises; customers could choose to go elsewhere, and you could lose market share overnight. Thus, the strength of having a high market share might be worth paying for, but it doesn’t qualify for
recognition as a separate asset; rather, it is effectively a part of goodwill.