Week 4

Question 1

criteria to meet definition of intangible asset

Answer 1

1. the asset is identifiable (can be separated / sold, arising from contractual or other legal rights)
2. the entity controls the future economic benefits’
3. the asset will generate future economic benefits

Question 2

an intangible asset will be recognized when both are met

Answer 2

1. it is probable future economic benefits will flow to the entity
2. the cost can be reliably measured

Question 3

expenditures for generating an IA can be capitalized if

Answer 3

it is in the development phase and:

1. the asset is technically able to be completed to generate future economic benefits
2. the entity plans to complete it
3. the entity will have use for the asset
4. the asset will create future economic benefits
5. the entity has the resources to create the asset
6. the entity can reliably measure the costs

Question 4

subsequent measurement of IAs

Answer 4

finite lives:
1. cost model: cost less AA
2. revaluation model: measures at fair value less AA and any impairment losses
indefinite lives:
are not amortized but are reviewed for impairment annually

Question 5

recognize a provision if

Answer 5

1. the entity has a present obligation arising as a result of a past event
2. it is considered probable that the entity will have an outflow of economic resources
3. the entity is able to make a reliable estimate of the outflow

Question 6

measurement of a provision

Answer 6

1. if there is a most likely outcome, that amount is recorded
2. if there are multiple likely outcomes, use a weighted average