Question Tag: Intangible Assets

Search 500 + past questions and counting.

  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

  • 7 Marks

FR – Nov 2024 – L2 – Q2c – Intangible Assets and Their Measurement

Determining the correct accounting treatment for various intangible assets in Dolo LTD's financial statements, including licensing, software, and book rights.

Question:

Dolo LTD, a market leader in the pharmaceutical industry, incurred the following expenditures during the financial year ended 31 December 2023:

Expenditure Item Amount (GH¢’000) Additional Information
Licence to operate in the pharmaceutical industry (10-year validity from January 2023) 200 Intangible asset
Costs incurred in setting up a website for a new product 20 The website will be developed in 2024
Purchase of 295 personal computers on 1 July 2023 (three-year useful life) 840 Excludes software costs
Windows operating system (for 295 PCs) 530 Perpetual software license
Microsoft Office software (for 295 PCs) 24 Three-year software license
Induction training for new staff 430 Staff training for new hires
Book rights purchased from another entity a few years ago 90 The rights have an indefinite useful life
Independent valuation of book rights as of 31 Dec 2023 240 Valued by an independent expert

Dolo LTD’s policy is to use the revaluation model for intangible assets where a market valuation is available.

Required:
Determine the carrying amount of intangible assets at 31 December 2023, in accordance with IAS 38 – Intangible Assets and IFRS.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – Nov 2024 – L2 – Q2c – Intangible Assets and Their Measurement"

  • 15 Marks

CR – May 2015 – L3 – Q7 – Impairment of Assets (IAS 36)

Evaluate the accounting treatment for non-current assets held for sale, impairments, and intangible assets for Ondo Telecoms Limited under IFRS.

ONDO TELECOMS LIMITED

Ondo Telecoms Limited is one of the biggest telecoms companies in Abuja. One month after the year-end, the Chief Finance Officer (CFO), while reviewing the company’s activities came up with the following issues for the year ended 30 September, 2014:

(a) The Board of Directors is not impressed with the performance of the Home Broadband operating segment which posted a loss of N1.7 billion in 2014 financial year following another loss of N0.8 billion in the 2013 financial year.

(b) The carrying amount of the assets in the segment is N4.3 billion as at 30 September, 2014 and N4.5 billion as at 30 September, 2013. Professional valuers were engaged and they came up with a fair value of N4.2 billion as at 30 September, 2013.

(c) The Board of Directors made the final decision in June 2014 to sell off the assets in this segment and concentrate on other business lines. Since the beginning of September, four serious bidders have been negotiating with Ondo. The board anticipates the sale to be concluded by the end of May 2015 with the transaction cost of N0.3 million.

(d) On 1 November 2013, Ondo Telecoms Limited acquired a block of flats with an estimated useful life of 50 years at a total cost of N225 million. The blocks of flats are to be rented out to its employees and engineers at market prices. The decision to acquire the block of flats was made by the board due to the need to have the engineers close to the head office to attend to technical issues immediately they arise.

(e) Professional valuers were engaged to value the flats as at 30 September, 2014 and a fair value of N232 million was determined.

(f) International Telecom Limited, which acquired Edo Communications Limited during the year, has just published its results. Edo Communications Limited was a direct competitor to Ondo Telecoms Limited and does similar business. The CFO noted that International Telecom Ltd. shows an asset of N110 million arising from Edo Communication Limited customer lists’. This made the CFO realize how valuable the customer details are and has engaged a professional valuer who valued them at N98 million.

(g) Over the years, Ondo Telecoms Limited’s main business has been the provision of mobile and fixed landlines services as well as broadband services. In July 2013, Ondo Telecoms Limited bid for the award of a subscription television license from the government.

(h) Ondo Telecoms Limited won the bid and paid N560 million for a five-year license beginning 1 October 2013. The license is transferred and at the time of winning the bid, the fair value of the license was estimated at N580 million. Due to the slow uptake of the television business, the license was revalued at N420 million as at 30 September, 2014 by a professional valuer.

Required:
Advise, with suitable computations, how the above transactions should be accounted for in the financial statements of Ondo Telecoms Limited under IFRS for the year ended 30 September, 2014.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2015 – L3 – Q7 – Impairment of Assets (IAS 36)"

  • 20 Marks

CR – May 2015 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Discuss implications of changes in accounting policy for intangible assets and demonstrate retrospective application in financial statements.

LIKELY EFFECT LIMITED

Likely Effect Limited has shown a sincere intention to be IFRS compliant. Among a number of events and transactions, there is the need to change the accounting policies of the company in trying to comply with a few other standards. As the Consultant of the company, your attention was drawn to the fact that prior to 2013, the company had capitalized training costs.

According to IAS 38, training cost is regarded as an internally generated intangible asset and cannot be capitalized. Therefore, there is the need for a change of accounting policy which must be applied retrospectively.

The training costs capitalized in 2012 was N6m while the total for periods before 2012 was N12m.
Training costs incurred in 2013 is N4.5m. Retained earnings were N600m and N649m at the beginning and end of 2012 respectively. The corporate income tax rate is 30% for the relevant periods. Additional information available is given below:

2013 (N’M) 2012 (N’M)
Income tax expense 24 21
Profit after tax 56 49
Share capital 50 50

Required:

(a) Advise the directors on the implication of the change in accounting standard relating to treatment of intangible assets and tax effect on the company. (5 Marks)

(b) Prepare statements of profit or loss and other comprehensive income and changes in equity showing a retrospective application of the change in policy. (7 Marks)

(c) Analyze the effects of the change in accounting policy on periods before 2013. (8 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2015 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)"

  • 15 Marks

CR – May 2016 – L3 – Q6 – Integrated Reporting

Advise Golden Path Plc on how traditional corporate reporting fails to meet the needs of financial capital providers and how Integrated Reporting can address this.

Corporations are realizing that in this 21st century, firms’ intangible assets and human capital are the most important assets for value creation, production, or rendering of services. A recent OECD report in 2006 attests to this and points to an emerging knowledge economy, where human capital and intangible assets lie at the core capabilities and competencies for innovation and business sustainability. There is therefore the general feeling and perception that traditional corporate reporting does not meet the capital allocation needs of providers of financial capital. One development has been the emergence of Integrated Reporting (IR), being promoted by the International Integrated Reporting Council (IIRC) and supported by IFAC and most professional accounting bodies globally. The framework issued in 2013, like IASB’s Conceptual Framework, is principles-based and as such does not prescribe KPIs but has some guiding principles and key content elements. Golden Path Plc is desirous of employing IR to overcome the present limitations of its traditional corporate reporting.

Required:

a) Write a report to the board of Golden Path Plc, advising them on why their financial statements may not meet the capital allocation needs of providers of financial capital in 21st-century firms, given the limitations of traditional corporate reporting which integrated reporting aims to address. (5 marks)

b) Briefly state why integrated reporting may still not resolve the main limitations identified above. (1 mark)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2016 – L3 – Q6 – Integrated Reporting"

  • 20 Marks

CR – Nov 2021 – L3 – Q4 – Provisions, Contingent Liabilities, and Contingent Assets (IAS 37)

Guidance on presenting litigation, lease contract, and brand valuation in Fidipote PLC’s financial statements.

You are the Financial Controller of Fidipote PLC, a bottling company with diverse products. The accountant responsible for preparing the 2020 annual financial statements is considering the accounting treatment of the following and has approached you for guidance:

a. On December 31, 2020, Fidipote PLC has a litigation proceeding involving a customer claiming damages in the sum of ₦50 million because she had allegedly been injured when drinking one of the company’s products. She had claimed that the company bottled a sharp object inside the content of the product which she swallowed and had to be operated upon in order to remove the object. Fidipote PLC is disputing the claim, maintaining that any injury was due solely to negligence on the part of the customer. As at December 31, 2020, the case was yet to be decided.
(8 Marks)

b. Fidipote PLC signed a ten-year lease agreement on a property requiring an annual payment of ₦5 million in advance on January 1, 2016. The property was used over the years as a Cinema Hall. As a result of the COVID-19 pandemic and the lockdown during 2020, the consequent long closure of the hall made patronage of cinema shows financially unsustainable. Fidipote PLC discovered that it has no further use of the building. It is not possible to sub-lease the building to another tenant, and remodeling cannot be done due to certain provisions of the lease agreement. As at December 31, 2020, the present value cost of outstanding lease installments amounted to ₦22.5 million.
(6 Marks)

c. The Managing Director made a proposal that the Fidipote brand name is unique and of significant market persuasion and should, therefore, be included as an asset in the financial statements. Due diligence, including market research by a certified consultant, has been done on this proposal. A valuation of ₦250 million was determined to be included in the financial statements as at December 31, 2020.
(6 Marks)

Required:
Explain how the above information, a to c, should be presented in the financial statements of Fidipote PLC for the year ended December 31, 2020.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2021 – L3 – Q4 – Provisions, Contingent Liabilities, and Contingent Assets (IAS 37)"

  • 15 Marks

CR – Nov 2018 – L3 – SC – Q6 – Financial Instruments (IAS 32)

Classify cryptocurrency holdings in financial statements, addressing IAS 32, IAS 38, and IAS 2.

You have been asked to make a presentation to your team on cryptocurrencies. A snapshot of your draft presentation includes the following:

“Cryptocurrency is a new phenomenon in the financial market. A cryptocurrency is a digital or virtual currency designed to serve as a medium of exchange. Cryptocurrencies are created through cryptography, often with a maximum possible number of ‘coins’ that can exist through solutions to a complex algorithm with their value supported only by the laws of supply and demand. Cryptocurrencies are currently not regulated by government or other similar entity.

The following are some of the types of cryptocurrency in the market:

  • Bitcoin: The first-ever cryptocurrency that started the market awareness and “boom.”
  • Ethereum: A programmable currency that lets developers build different distributed apps and technologies that wouldn’t work with Bitcoin.
  • Ripple: Unlike most cryptocurrencies, it doesn’t use a blockchain to reach a network-wide consensus for transactions. An iterative consensus process is implemented, which makes it faster than Bitcoin but also makes it vulnerable to hacker attacks.

There are many merchants – both online and offline – that accept Bitcoin as a form of payment, while Ethereum and Ripple are not yet widely accepted.

Required:

Following your presentation, you are asked how a holding of cryptocurrency should be classified in the financial statements of your clients. (15 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2018 – L3 – SC – Q6 – Financial Instruments (IAS 32)"

  • 15 Marks

FR – May 2015 – L2 – SC – Q5 – Impairment of Assets (IAS 36)

Discuss intangible assets, characteristics and recognition of goodwill, development cost conditions, and calculate goodwill on consolidation.

IAS 38 – Intangible Assets, specifies the criteria that must be met before an intangible asset can be recognised by an entity in its Financial Statements. Intangible assets are identifiable non-monetary assets without physical substance and include goodwill, brands, copyright and research and development expenditure. They could be
purchased and/or internally generated.
Required:

(a) Identify any TWO characteristics of goodwill which distinguish it from other intangible assets. (2 Marks)

(b) Explain THREE differences between purchased goodwill and non-purchased goodwill. (3 Marks)

(c) Identify any THREE conditions that must be met under IAS 38 for development expenditure to be recognised as an intangible asset. (3 Marks)

(d) State any FOUR factors to be considered when determining the useful life of an intangible asset. (4 Marks)

(e) Calculate the goodwill on consolidation from the information below:
Parent has 80% interests in subsidiary.

Item Amount (N’000)
Parent’s cost of investment in subsidiary 299,700
Fair value of non-controlling interest at acquisition date 169,500
Net asset at acquisition date (subsidiary) 345,800
Impairment of goodwill 62,200

Required: Compute the goodwill on consolidation. (3 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2015 – L2 – SC – Q5 – Impairment of Assets (IAS 36)"

  • 15 Marks

FR – Nov 2022 – L2 – Q5 – Professional Behaviour and IAS 38 Conditions

Discuss professional behaviour and threats for accountants, and conditions for recognizing development costs.

(a) Explain briefly what is meant by professional behaviour and outline THREE threats that could affect the work of professional accountants. (5 Marks)

(b) IAS 38 prescribes the requirements for reporting intangible assets in the financial statements of an entity.

Required:
i. Explain FIVE conditions under which development costs can be recognised as intangibles in financial statements. (5 Marks)

ii. Highlight FIVE conditions, which should be considered to determine the useful life in the amortisation of intangible assets in the financial statements. (5 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – Nov 2022 – L2 – Q5 – Professional Behaviour and IAS 38 Conditions"

  • 15 Marks

FR – May 2024 – L2 – SB – Q7 – Impairment of Assets (IAS 36)

Discuss the measurement models for intangible assets and calculate the carrying amount and revaluation surplus for Olumo-Taxi Limited.

a. IAS 38 – Intangible Assets allows a business to choose one of two measurement models as its accounting policy for intangible assets after acquisition. However, the same model should be applied to all assets in the same class.

Required:
Discuss the TWO measurement models for intangible assets. (3 Marks)

b. Olumo-Taxi Limited’s financial year ends on December 31. The company adopted the revaluation model for its intangible assets and revalues them on a regular three-year cycle.

However, for intangible assets with a finite life, Olumo-Taxi Limited transfers the relevant amount from revaluation reserve to retained earnings each year.

During the year 2019, Olumo-Taxi Limited incurred N700,000 on the process of preparing an application for licenses for 15 taxis to operate in a holiday resort very close to Abeokuta. In order to prevent congestion and excessive traffic pollution, the licensing authority only allowed a small number of taxis to operate.

The outcome of the company’s application was uncertain up to November 30, 2019, when the local government authority accepted its application. In December 2019, Olumo-Taxi Limited incurred a cost of N90,000 in registering its licenses. The licenses were for a period of 9 years from January 1, 2019.

The licenses are freely transferable, and an active market in them exists. The fair value at December 31, 2019, was N94,500 per taxi, and Olumo-Taxi Limited carried them at fair value in its statement of financial position at December 31, 2019.

At December 31, 2022, Olumo-Taxi Limited undertook its regular revaluation. On that date, the licensing authority announced that it would triple the number of licenses offered to taxi operators, and there were transactions in the active market for licenses with six years to run at N45,000.

Required:
Calculate, with explanations, the carrying amount and revaluation surplus of the intangible assets of Olumo-Taxi Limited according to IAS 38 as at:
i. December 31, 2019
ii. December 31, 2022 (before regular revaluation)
iii. December 31, 2022 (after regular revaluation)
(12 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2024 – L2 – SB – Q7 – Impairment of Assets (IAS 36)"

  • 1 Marks

FA – May 2012 – L1 – SA – Q32 – Elements of Financial Statements

Identifying the intangible business asset related to reputation and customer loyalty.

An intangible business asset which relates to reputation, customers’ loyalty, and popularity garnered over the years, and due to the expertise of the business owner or the quality of goods produced or services rendered, is called ………………………….

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – May 2012 – L1 – SA – Q32 – Elements of Financial Statements"

  • 6 Marks

CR – Nov 2021 – L3 – Q2c – IAS 38: Intangible Assets

Advise Zunka Ltd on how to account for the cost of adapting equipment and the provision for potential damages in a legal case for patent infringement.

Zunka Ltd (Zunka) is a private pharmaceutical company in Ghana, which imports medical equipment manufactured under a patent. Zunka subsequently adapts the equipment to fit the market in Ghana and sells the equipment under its own brand name. Zunka originally spent GH¢6 million in developing the know-how required to adapt the equipment, and, in addition, it costs GH¢100,000 to adapt each piece of equipment. Zunka has capitalised the cost of the know-how and the cost of adapting each piece of equipment sold as patent rights.

Zunka is being sued for patent infringement by Sajida Ltd (Sajida), the owner of the original patent, on the grounds that Zunka has not materially changed the original product by its subsequent adaptation. If Sajida can prove infringement, the court is likely to order Zunka to pay damages and stop infringing its patent. Zunka’s lawyers are of the view that the court could conclude that Sajida’s patent claim is not valid.

Sajida has sued Zunka for GH¢10 million for using a specific patent and a further GH¢16 million for lost profit due to Zunka being a competitor in the market for this product. Zunka has offered GH¢14 million to settle both claims but has not received a response from Sajida.

As a result, the directors of Zunka estimate that the damages it faces will be between the amount offered by Zunka and the amount claimed by Sajida. The directors of Zunka would like advice as to whether they have correctly accounted for the costs of the adaptation of the equipment and whether they should make a provision for the potential damages in the above legal case in the financial statements for the year ended 31 March 2021.

Required:

Advise the directors of Zunka on how the above transaction should be accounted for in its financial statements for the year ended 31 March 2021 in accordance with relevant International Financial Reporting Standards (IFRS).

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2021 – L3 – Q2c – IAS 38: Intangible Assets"

  • 5 Marks

CR – Mar 2024 – Q4b – Business combinations and consolidation

Identify factors to consider when determining if reacquired rights constitute identifiable intangible assets in a business combination.

An acquirer may reacquire a right that it had previously granted to the acquiree to use one or more of the acquirer’s recognised or unrecognised assets. Examples of such rights include a right to use the acquirer’s trade name under a franchise agreement or a right to use the acquirer’s technology under a technology licensing agreement. Such reacquired rights generally are identifiable intangible assets that the acquirer separately recognises from goodwill.

Required: Identify FOUR (4) factors that should be considered in deciding on whether reacquired rights constitute an identifiable intangible asset.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Mar 2024 – Q4b – Business combinations and consolidation"

  • 20 Marks

CR – Aug 2022 – L3 – Q2 – IFRS 5: Non-current assets held for sale and discontinued operations | IAS 38: Intangible assets

This question focuses on the accounting treatment of non-current assets held for sale, leasebacks, franchise costs, and intangible asset amortization.

Unity Link Ltd (ULL) has enjoyed a significant market share in the southern part of Ghana over the years. However, ULL has suffered liquidity challenges due to the effects of the pandemic lockdown and its subsequent restrictions. ULL’s main source of income, dealings in luxury goods, has reduced significantly because customers have shifted their demand to necessities of life.

The following transactions were undertaken by ULL:

a) ULL has entered into a contract to sell one of their gold refinery equipment on 31 January 2023 and immediately lease it back. The Finance Director, in consultation with the Finance Manager, has decided to classify this transaction as a non-current asset “held for sale” in its financial statements for the year ended 31 December 2022 as he rates this transaction as highly probable. The market value for the gold refinery equipment has not changed in many years and is unlikely to change in the foreseeable future. The contract states that the gold refinery equipment should be disposed of at its fair value of GH¢6 million and for ULL to lease it back over a period of 10 years. It is estimated that GH¢400,000 is needed to refurbish the gold refinery equipment and there is no legal requirement to do so. ULL has in error treated this amount as a reduction of the asset’s carrying amount at 31 December 2022, and the corresponding debit has been made to profit or loss. The gold refinery equipment is depreciated at 5% per annum using the reducing balance method, and at 31 December 2022, the carrying amount after depreciation and deduction of the proposed cost of refurbishment is GH¢3.6 million. (7 marks)

b) ULL has established a chain of business franchise. This franchise was obtained from a foreign company. In this arrangement, dealers in luxury items, especially refined gold, obtain a franchise under a brand name “Lockhert” from ULL to sell its own refined gold. The budgeted costs of obtaining a franchise from a foreign company are based on the estimated revenues from the franchise given out to local companies. These costs of obtaining a franchise are then capitalised as an intangible asset and called “Franchise cost.” The Finance Director is convinced that the franchise is consumed as Franchisees produce their own refined gold. ULL currently amortises the franchise based on estimated future revenues from the franchise. For example, the franchise is estimated to generate GH¢1.6 million of revenue in total, and GH¢800,000 of that revenue will be generated in year one. The intangible asset will be amortised by 50% in year one. However, industry practice is to amortise the capitalised cost less its recoverable amount over its remaining useful life. (6 marks)

c) ULL’s franchise registration fee, which is separate from the franchise fee, is treated as an intangible asset and is initially recognised at the fair value of the consideration paid for the registration. Subsequent franchise fees, which are paid yearly, are subject to negotiation. The franchise contract has embedded contingent performance conditions where a franchisee may be paid a bonus based on an increase in sales. This bonus is an additional contract cost. ULL has reasoned that the only way to determine the value-in-use of the cost of the franchise is when a new customer takes over from an existing one who is prepared to sell his franchise. This treatment is what prevails in the industry. (7 marks)

Required:

In accordance with International Financial Reporting Standards, discuss the appropriate accounting treatment of the above transactions in the financial statements of ULL.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Aug 2022 – L3 – Q2 – IFRS 5: Non-current assets held for sale and discontinued operations | IAS 38: Intangible assets"

  • 6 Marks

CR – Nov 2017 – L3 – Q2c – IAS 38: Intangible assets

Recommend the treatment of training, marketing, and customer list expenses in the financial statements.

Oyarefa Ltd acquired 80% ordinary shares in Abokobi Ltd on 1 January 2015. The intangible assets of Abokobi Ltd include GH¢9 million of training and marketing expenditure incurred during the year ended 31 December 2016. The Directors of Abokobi Ltd believe that these should be capitalised as they relate to the startup period of a new business venture in Oyibi, and they intend to amortise the balance over the five years commencing 1 January 2017.

On 1 July 2016, Oyarefa Ltd purchased a customer list from the liquidator of a competitor. The price paid was GH¢4 million and was based on the list having a useful life of two years. At 31 December 2016, the Finance Director of Oyarefa Ltd commissioned a report on the value of the customer list from a firm of independent valuers. The firm has valued the customer list at GH¢5 million and estimates a total useful life of five years. The customer list is currently included in intangible assets at a carrying value of GH¢4 million, but the Finance Director wants the list to be revalued to the higher amount.

Required:
Recommend the treatment of the above in the consolidated financial statements for Oyarefa Ltd Group for the year ended 31 December 2016 in accordance with IAS 38: Intangible Assets.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q2c – IAS 38: Intangible assets"

Elevate your professional expertise across key business domains with our comprehensive training programs

Our offerings

Contact Info

  • +233203701923
    +233543919232
  • info@nbcinstitute.com

Customer

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope
Oops!

This feature is only available in selected plans.

Click here to view all plans

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

Login
Upgrade Plan

If you’re not subscribed to a plan, click on the button below to choose a plan

Subscribe to a plan