Question Tag: Accounting treatment of distribution rights purchased by Mankeni Ltd in accordance with IAS 38.

Mankeni Ltd (Mankeni) is one of Africa’s leading entertainment companies which creates and secures the rights to phenomenal content from all over the world. Mankeni has entered into the following transactions during the financial year ended 30 November 2023:
i) On December 1, 2022, Mankeni purchased the sole West African distribution rights for a special digital set-top box for home entertainment. The rights were purchased for GH¢5.25 million over a three-year period.
(3 marks)

ii) Mankeni started working on building the brand and increasing sales of the item mentioned in (i) above on December 1, 2022. Due to the enormous success of this endeavour, the “Mankeni” brand became popular. Mankeni wishes to include the brand in its financial statements for the year ended 30 November 2023 at its estimated fair value of GH¢30 million.
(2 marks)

iii) Mankeni wishes to replicate its West African success in Eastern African countries by selling the product in other markets. The company has spent GH¢1.25 million during the year researching the Eritrea market and wishes to capitalise this expenditure as an intangible asset.
(2 marks)