Kizmit Ltd. acquired Nuance Ltd. in a business combination. One of the main reasons for the acquisition is that Kizmit wanted access to Nuance's extensive customer list. The list is not recorded on Nuance's books and has an estimated value of $100,000 and an estimated life of 7 years. On Kizmit's consolidated statement of financial position, what value should be shown for Nuance's customer list?
A)$0, since it was not recorded on Nuance's books.
B)$100,000 less any accumulated amortization (calculated over 7 years)and any impairment losses.
C)$100,000 less any impairment losses.
D)$100,000 less any accumulated amortization (calculated over 5 years)and any impairment losses.

Question

Quizplus · Accepted Answer

The customer list meets the definition of an intangible asset and is presumed to have a limited useful life. Therefore, it should be recognized on the consolidated statement of financial position at its fair value of $100,000 less any accumulated amortization (calculated over 7 years) and any impairment losses. Option A is incorrect because the fact that the customer list was not recorded on Nuance's books does not impact its fair value or its recognition on Kizmit's consolidated statement of financial position. Option C is incorrect because amortization is required to account for the systematic allocation of the asset's cost over its limited useful life. Option D is incorrect because the estimated life of the customer list is 7 years, not 5.