Vol. 3 LM2 Non-Current Assets: Intangible Assets

Question 1

Concept

are identifiable non-monetary assets without physical substance, per IAS 38, paragraph 8

Balanace Sheet

Answer 1

non-current assets: intangible assets

Balance Sheet

Question 2

Define

intangible assets

Balanace Sheet

Answer 2

are identifiable non-monetary assets without physical substance.

Balanace Sheet

Question 3

Concept

can be acquired singly (can be separated from the entity) or is the result of specific contractual or legal rights or privileges.

Balanace Sheet

Answer 3

an identifiable asset

Balanace Sheet

Question 4

Define

identifiable asset

Balanace Sheet

Answer 4

can be acquired singly (can be separated from the entity) or is the result of specific contractual or legal rights or privileges.

Balanace Sheet

Question 5

Examples

identifiable assets

Balanace Sheet

Answer 5

patents,
licenses,
trademarks

Balanace Sheet

Question 6

measurement models

intangible assets

Balanace Sheet

Answer 6

US GAAP: allows only cost model (same for PPE)

IFRS: cost model and revaluation model
revaluation model can only be selected when there is active market for an intangible asset.

Balanace Sheet

Question 7

Fill in the blank

For each intangible asset, a company assesses whether the useful life of the asset is _____ or ______.

Balanace Sheet

Answer 7

finite [or] indefinite

Balanace Sheet

Question 8

Apply amortization principles

an intangible asset with a finite useful life

Balanace Sheet

Answer 8

amortized on a systematic basis over the best estimate of its useful life, with the amortization method and useful life estimate reviewed at least annually.

Balanace Sheet

Question 9

Apply amortization principles

an intangible asset with an indefinite useful life

Balanace Sheet

Answer 9

it is not amortized. Instead, at least annually, the reasonableness of assuming an indefinite useful life for the asset is reviewed.

Balanace Sheet

Question 10

Impairment principles

an intangible asset with a finite useful life

Balance Sheet

Answer 10

same as for PPE

Balance Sheet

Question 11

Impairment principles

an intangible asset with an indefinite useful life

Balance Sheet

Answer 11

the asset is tested for impairment after the asset is reviewed under the assumption of an indefinite useful life

Balance Sheet

Question 12

Note disclosures about intangible assets include information about:

Balance Sheet

Answer 12

useful lives,
amortization rates and methods,
impairment loss recognition and reversal protocols

Balance Sheet

Question 13

External financial analysis

Due to the doubtful nature of the book value of goodwill of companies, how should analysts treat this value?

Balance Sheet

Answer 13

examine each listed intangible and assess whether an should adjustment should be made.

Balance Sheet

Question 14

under US GAAP & IFRS

the treatment of internally created identifiable intangibles

Balance Sheet

Answer 14

internally created identifiable intangibles are required to be expensed rather than reported on the balance sheet

Balance Sheet

Question 15

fill in the blank

Generally, acquired intangible assets are reported as (1) ___ as opposed to (2)____, if they arise from contractual rights

Balance Sheet

Answer 15

separately identifiable intangibles ; goodwill

Balance Sheet

Question 16

enumerate

Costs related to categories that are typically expensed under IFRS and US GAAP, and;
prohibited from capitalization as an asset

Balance Sheet

Answer 16

• internally generated brands, mastheads, publishing titles, customer lists;
• start-up costs;
• training costs;
• administrative and other general overhead costs;
• advertising and promotion;
• relocation and reorganization expenses
• redundancy and other termination costs

Balance Sheet