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Commerce and BusinessbackBusinessbackFinancial AccountingbackFinancial Accounting and Reporting An International ApproachbackPractice Set 2490back

Accounting For Intangibles

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Question 1
Free
True/False

Research of market potential prior to the launch of a product is permissible to be capitalised as an intangible asset.

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True

False

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Question 2
Free
True/False

IAS 38 permits the use of revaluation model for intangible assets if there is an active market to determine fair value.

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False

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Question 3
Free
True/False

The revaluation model requires all intangible assets in the same class to have a fair value determined by reference to an active market.

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True

False

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Question 4
Free
True/False

If the fair value of a revalued intangible asset can no longer be determined by reference to an active market,IAS 36 requires the use of the cost model.

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False

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Question 5
Free
True/False

Internally generated identifiable intangible assets may be recognised for financial accounting purposes in Europe.

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True

False

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Question 6
True/False

International convergence has meant that there is no longer one specific standard related to intangibles

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True
False
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Question 7
True/False

According to IAS 38 on intangible assets,if an entity buys another entity separate values can be assigned to purchased goodwill and to a brand name.

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True
False
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Question 8
True/False

IAS 38 prohibits the recognition of intangible assets using the revaluation model.

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True
False
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Question 9
True/False

Where a revaluation occurs,it is to be to the fair value of the asset.

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True
False
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Question 10
Multiple Choice

Examples of elements of a business that commonly make up goodwill are:

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A
patents and licences.
B
trademarks and brand names.
C
research and development.
D
established reputation and loyal customers.
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Question 11
Multiple Choice

Because intangible assets have no physical form:

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A
They are not subject to the recognition criteria of other assets and may be recorded if they satisfy the three elements of the definition.
B
They must be expensed immediately, as assets must be able to be measured.
C
They have no real value and should be excluded from accounting reports.
D
None of the given answers are correct.
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Question 12
Multiple Choice

An intangible asset may be recorded:

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A
if acquired from an external party at a cost.
B
if it is internally generated and fits the definition of an asset and meets the associated recognition criteria.
C
at a value other than cost if that value more reliably records the worth of the intangible asset.
D
at the cost of the asset, which must exclude any additional expenditure required to prepare the asset for use.
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Question 13
Multiple Choice

In order to determine whether or not expenditure should be treated as an intangible asset,the relevant test to apply is:

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A
It should be recognised when (a) it is definite that future economic benefits will eventuate or (b) the asset possesses a cost or other value that can be measured reliably.
B
It should be recognised if (a) the expenditure is with an external party in an arm's length transaction for a separately identifiable intangible asset or (b) the intangible asset arises as the difference between the net tangible assets of an entity and the price paid for that entity.
C
It should be recognised if (a) it is part of a specified plan by management to develop and maintain a separately identifiable asset or (b) the intangible asset was purchased in an arm's length transaction and is actively traded in a market.
D
It should be recognised when and only when (a) it is probable that future economic benefits will eventuate and (b) the asset possesses a cost or other value that can be measured reliably.
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Question 14
Multiple Choice

IAS 38 states that intangible assets:

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A
may not be revalued and must be amortised over their useful lives.
B
are only able to be revalued if they have been internally generated and there is an active market for them.
C
may only be revalued to their fair value as assessed by a licensed valuer.
D
may be measured by using either the cost model or the revaluation model.
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Question 15
Multiple Choice

Which of the following statements is correct with respect to research and development expenditures in accordance with IAS 38?

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A
Activities aimed at obtaining knowledge that is likely to produce a viable commercial product can be capitalised.
B
Formulation, design, evaluation and final selection of alternative materials to be used in producing a viable commercial product can be capitalised.
C
Design, construction and operation of a pilot plant that is not of a scale economically feasible for commercial production can be capitalised.
D
Search for, evaluation and final selection of, applications of research findings and other knowledge can be capitalised.
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Question 16
Multiple Choice

The requirement of IAS 38 in relation to the amortisation of development cost is that:

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A
It is to be amortised straight-line over a period not greater than 20 years.
B
It is to be amortised from the time of deferral so as to match the cost to the related benefits.
C
It is to be amortised using an accelerated depreciation rate over a period not exceeding 10 years.
D
It is to be amortised from the time the asset is available for use and shall reflect the consumption of the economic benefits by the entity.
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Question 17
Multiple Choice

Glass 4 Windows is involved in a research and development project to create a filtering window that removes the need for curtains.For the current year ended 30 June 2011 expenditure on the project is as follows: image The window is expected to earn revenues of $70 000 per year for the 10 years commencing 1 July 2011.Assuming straight-line amortisation,how much of the research and development cost should be expensed this period and what amount should be amortised in the year ended 30 June 2014?

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A
Expensed in 2011: $58 500; amortisation in 2014: $58 500
B
Expensed in 2011: $235 000; amortisation in 2014: $35 000
C
Expensed in 2011: $235 000; amortisation in 2014: $28 000
D
Expensed in 2011: $350 000; amortisation in 2014: $23 500
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Question 18
Multiple Choice

Walking on Air is developing a new form of individual transport that will act like a personal hovercraft.Costs for the year ended 30 June 2012 are: image Due to the high individual cost of items,sales of this 'prototype' model will be small and generate $100 000 per year over the next 4 years.Following that time,a new and cheaper consumer model will be under production based on the research developed for the prototype; however,it will require additional development expenditure.How much of the research and development cost should be expensed in the period ended 30 June 2012 and what amount should be amortised in the year ended 30 June 2006 (rounded to the nearest dollar)?

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A
Expensed in 2012: $1 200 000; amortisation in 2014: $100 000
B
Expensed in 2012: $950 000; amortisation in 2014: $216 667
C
Expensed in 2012: $950 000; amortisation in 2014: $65 000
D
Expensed in 2012: $1 200 000, amortisation in 2014: $30 000
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Question 19
Multiple Choice

There is a concern that research and development may be reduced as a result of the new requirements in IAS 38 because:

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A
Companies will not have the cash available to pay for the research expenses up-front.
B
Recognising expenses early will allow for larger profits later, which will help smaller firms.
C
The 'horizon problem' suggests managers will not invest in long-term projects that do not immediately increase profits.
D
Shareholders are only interested in short-term profits and will not be impressed by strategies that attempt to increase the long-term value of their shares.
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Question 20
Multiple Choice

Castle Co Ltd is working on three research projects.Project Jonah is government-sponsored research on synthesising currently available research results on the possible triggers of asthma attacks.Project Beta involves researching the genetic tags associated with heart disease based on the genome project.A test to identify the predisposition to heart disease in children has been developed and will be on the market in 2013.Since 2011 research and development expenditures on this project are applied development costs only.Project Sigma is cutting edge research being conducted to try and discover a means of 'disassembling' molecules and then 'reassembling' them in their original form.The company hopes that this work will lay the basis for future dreams of teleportation as a method of transport.Details of expenditures and recoverable amounts expected beyond a reasonable doubt at this time are: image What is the total research and development deferral for each project as at the end of the year 2012?

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A
Jonah: $15 000; Beta $90 000; Sigma $0
B
Jonah: $20 000; Beta $50 000; Sigma $30 000
C
Jonah: $15 000; Beta $70 000; Sigma $50 000
D
Jonah: $0; Beta $90 000; Sigma $0
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