A company 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 $200,000 and an indefinite economic life. How should the company show the asset on its consolidated statement of financial position?
A)$200,000 less any impairment losses
B)$200,000 less accumulated amortization (calculated over 10 years)and any impairment losses
C)$200,000 less accumulated amortization (calculated over 40 years)and any impairment losses
D)The company should not show the asset on the consolidated financial statement as the subsidiary does not do so.

Question

Quizplus · Accepted Answer

The asset should be recorded at fair value at the date of acquisition, which is $200,000 in this case. As it has an indefinite economic life, it should not be amortized but tested for impairment annually. Therefore, the asset should be shown on the consolidated statement of financial position at its fair value of $200,000 less any accumulated impairment losses. Option A correctly reflects this treatment.

A Company Has a Subsidiary That Has an Intangible Capital