Ursula Ltd. has a subsidiary that has an intangible capital asset. It has not been recorded on the subsidiary's books, but at the date of acquisition, the asset had a fair value of $350,000 and an indefinite economic life. How should Ursula show the asset on its consolidated statement of financial position?
A)$350,000 less accumulated amortization (calculated over 10 years)and any impairment losses.
B)$350,000 less accumulated amortization (calculated over 40 years)and any impairment losses.
C)The company should not show the asset on the consolidated financial statement as the subsidiary does not do so.
D)$350,000 less any impairment losses.

Question

Quizplus · Accepted Answer

According to IFRS 3 Business Combinations, an intangible asset that is not recognized in the books of the acquiree should be recognized at its fair value on the acquisition date, provided that it meets the definition of an intangible asset and its fair value can be measured reliably. In this case, the intangible asset with a fair value of $350,000 and an indefinite economic life should be recognized on Ursula Ltd.'s consolidated statement of financial position at its fair value of $350,000 less any impairment losses. The asset should not be amortized over a specific period since it has an indefinite economic life. Therefore, the correct answer is D.