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level: Intangible non-current assets and amortisation

Questions and Answers List

level questions: Intangible non-current assets and amortisation

QuestionAnswer
According to IAS 38 – Intangible assets – how should research be treated in the financial statements?Research costs should be expensed in the Income Statement.
What is Goodwill?The excess of the value of a business over the fair value of the net assets.
What is the key accounting standard relating to research and development?IAS 38
What are intangible non-current assets?"An identifiable, non-monetary asset without physical substance"
What are the two examples of intangible non-current assets that are examinable in F3?Goodwill and R&D
What is development?The application of research and knowledge to the production of new or greatly improved products or services.
What does IAS 38 separate R&D into?The research phase and the development phase.
Under IAS 38 what is the criteria for intangible assets?They must: - Be able to measure the expenses in a reliable way - Be an identifiable product - Have the resources to complete development - Have an identifiable market
In which financial statement should research be recorded?In the Statement of Profit or Loss as an expense when incurred.
In which financial statement should development be recorded?In the Statement of Financial Position capitalised as Intangible non-current assets.
What is amortisation?When "the cost of the development expenditure is matched against the revenue it produces." This is only begun when the asset is available for use.
In which financial statement should amortisation expenses be recorded.In the Statement of Profit or Loss as an expense.
In which financial statement should accumulated amortisation be recorded?In the Statement of Financial Position as a deduction to development.
When should an intangible asset *NOT* be amortised?When the asset is considered to have an indefinite useful life.
According to IAS 38 – Intangible assets – how should research be treated in the financial statements?Research costs should be expensed in the Income Statement.
How is a contingent asset treated in the Financial Statements if the likelihood of the asset being confirmed is regarded as probable?If it is probable, then the asset should not be recognised in the Financial Statements, but it should be disclosed by way of note.
What does IAS 38 paragraph 8 state with regards to the definition of Research?"Original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding."
What does IAS 38 paragraph 8 state with regards to the definition of Development?"The application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before the start of commercial production of use."
What are the two ways of measuring intangible assets?The Cost method and the Revaluation method.
Under the Cost method of measuring intangible assets, where are the charges accounted for?In the SPL only.
Under the Revaluation method of measuring intangible assets, where are the movements in the CA accounted for?In other comprehensive income and other components of equity.
What are development costs?Internally generated intangible assets which are capitalised, provided that specific criteria have been complied with.
What is the acronym for the criteria for development costs?PIRATE
What are the criteria for development costs?Probable inflow of economic benefits; Intention to complete the asset and use/sell it; Reliable measurement of development; Adequate financial resources; Technical feasibility to complete the asset; Expected to be profitable.
If the criteria for development expenditure are not met, what should be done?It must be written off to the Statement of profit or loss.
How should equipment for research be treated?It is capital expenditure and should be capitalised and depreciated.