2F Intangible Assets

Question 1

Finite (definite) intangible assets

Answer 1

limited life. Amortized

Question 2

Indefinite intangible assets

Answer 2

Unlimited life. Not Amortized.

Question 3

Examples of finite intangible assets

Answer 3

Patents, Copyrights, Franchises, Trademarks, Leasehold improvements

Question 4

Amortizing intangible assets formula

Answer 4

Cost of intangible asset
\_\_\_\_\_\_\_\_\_\_
Estimated useful (not legal) life

Question 5

Example of indefinite intangible asset

Answer 5

Goodwill

Question 6

What is goodwill?

Answer 6

Cost to purchase a company > net assets of the company being bought

Question 7

Carrying value of finite intangible assets

Answer 7

Cost less amortization

Question 8

Testing for impairment of finite intangible assets

Answer 8

Step 1 - If more than 50% likely that impairment has occurred?
Step 2 - Test: Is the carrying value > non-discounted future cash flows? Continue to amortize.
Step 3 - Is the carrying value > recoverable amount?
Step 4 - Dr: Impairment loss, Cr: Asset

Cannot write the asset up again

Question 9

Testing for impairment of indefinite intangible assets

Answer 9

Step 1 - If more than 50% likely that impairment has occurred?
Step 2 - Test: Don’t amortize. Is carrying value > fair value?
Step 3 - Is the carrying value > recoverable amount?
Step 4 - Dr: Impairment loss, Cr: Asset

Cannot write the asset up again

Question 10

Recoverable amount for finite intangible asset

Answer 10

FMV less cost to sell or value in use

Question 11

Recoverable amount for indefinite intangible asset

Answer 11

FMV less cost to sell

Question 12

Value in use

Answer 12

Present value of future cash outflows from use
+ Present value of cash inflows from sale
_______________
Value in use

Question 13

Goodwill impairment entry

Answer 13

Dr - Impairment loss
Cr - goodwill

Do not amortize. cannot write up again

Question 14

IFRS Cost Model

Answer 14

For inactive market

Finite life:
Costs less Accum Depr less Accum Impair = CV

Indefinite life:
Cost less accum impair = CV

Indefinite life must be tested annually for impairment

Question 15

IFRS Revaluation Model

Answer 15

For active markets

Finite life:
Fair value less Accum Amort less Accum Impair = CV

Indefinite life:
Fair value less accum impair = CV

Indefinite life must be tested annually for impairment

Question 16

Under IFRS, asset is impaired if…

Answer 16

CV > Recoverable amount

Recoverable amount is GREATER of:
Net Selling Price = Fair value less costs to dispose
Value in use = Estimated future cash flows from continued use