Intangible Assets

Question 1

Intangible assets

Answer 1

identifiable, non-monetary asset without physical substance

Question 2

identifiability

Answer 2

tests whether a company can divide an asset from other assets and deal with it as an individual asset (separability)

Question 3

separability

Answer 3

is capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, asset or liability

Question 4

non-monetary

Answer 4

an asset is monetary if it is money held or an asset to be received in fixed or determinable amounts of money

Question 5

Criteria recognition on intangible assets

Answer 5

• identifiability (meets definition of intangible asset)
• control (power to obtain economic benefits asset and ability to deny access benefits to all other parties
• future economic benefits probable
• reliable measurement of costs

Question 6

Difficult to recognize internally generated intangible assets

Answer 6

• problem of establishing whether or not there is an identifiable asset which will generate future economic benefits (highly uncertain)
• problem of determining the cost of the asset reliably

Question 7

Research expenses recognition

Answer 7

always recognized as an expense

Question 8

Development expenses recognition criteria

Answer 8

• technical feasibility
• intention to complete the intangible asset and to use or sell it
• ability to use or sell it
• demonstration of how the intangible asset will generate economic benefits
• availability of adequate technical, financial, and other resources to complete the development
• ability to measure reliably the expenditure

Question 9

explicit recognition exclusions

Answer 9

• internally generated goodwill
• internally generated brands, mastheads, publishing titles, etc.
• certain expenditures relating to start-up activities, training activities, advertising and promotional activities, or relation and reorganization of the entity

Question 10

measurement at initial recognition

Answer 10

at cost (purchase price, directly attributable costs or preparing the asset for its intended use, costs of generating an intangible asset)

Question 11

not directly attributable costs intangible assets

Answer 11

indirect costs and general overheads, such as selling or administrative costs, costs of staff training, initial losses

Question 12

subsequent measurement intangible assets

Answer 12

• cost model - measurement at cost less accumulated amortization and impairment losses
• revaluation model - measurement at fair value determined at regular revaluation dates less any subsequent accumulated amortization and impairment losses (ONLY if active market exists)

Question 13

residual value assumed to be zero unless

Answer 13

• there is a commitment by a third party to purchase at end useful life
• there is an active market for asset