- 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.
Question
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.
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