- 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.
Question
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)
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