Question 1

When the value of an intangible asset is impaired,the change in the value of the asset is:

Accepted Answer

The impairment of an intangible asset is recognised as a charge in the statement of comprehensive income. It is not recognised as a charge to equity or amortised over a period not exceeding 20 years.

Question 2

The initial recognition of the costs associated with intangible assets as an asset rather than an expense:

Accepted Answer

The initial recognition of the costs associated with intangible assets as an asset rather than an expense is allowable provided that a future economic benefit exists. This is in accordance with the International Accounting Standards Board's definition of an intangible asset as an identifiable non-monetary asset without physical substance that is expected to generate future economic benefits for the entity. The treatment for income tax purposes or materiality of the cost does not determine whether the cost should be recognized as an asset or an expense.

Question 3

AASB 138 prohibits recognising as intangible assets all internally generated:

Accepted Answer

B

Question 4

Which of these is not an identifiable intangible asset?

Accepted Answer

All of the options given are identifiable intangible assets. A patent is a legal right granted to prevent others from selling or using an invention for a certain period of time. A franchise is a contract that allows an individual or company to use the trademark, products, and services of another company. A television station license is a permit issued by a government agency to operate a television station.

Question 5

The main reason why accounting for intangible assets is more difficult than accounting for other assets is:

Accepted Answer

The answer of The main reason why accounting for intangible...

Question 6

Prior to the first Australian accounting standard on research and development,costs associated with research and development were usually:

Accepted Answer

Prior to the first Australian accounting standard on research and development, costs associated with research and development were usually expensed in the period incurred.

Question 7

In negotiations leading up to a sale agreement,which of these is a method that can be used to estimate the amount of goodwill that exists in a business?

Accepted Answer

The answer of In negotiations leading up to a sale...

Question 8

In AASB 138,an 'identifiable non-monetary asset without physical substance',is the definition of:

Accepted Answer

An identifiable non-monetary asset without physical substance is an intangible asset, as defined in AASB 138.

Question 9

Which of these accounting standards applies to goodwill?

Accepted Answer

All of the above standards apply to goodwill in different contexts. AASB 3 relates to Business Combinations and addresses how goodwill is recognized upon acquisition. AASB 136 Impairment of Assets provides guidance on how to test goodwill for impairment. AASB 138 Intangible Assets covers the recognition and measurement of intangible assets, including goodwill when it is internally generated, although internally generated goodwill cannot be recognized as an asset.

Question 10

When the sum of the fair values of the identifiable net assets acquired exceeds the cost of acquisition,the difference is known as:

Accepted Answer

The answer of When the sum of the fair values...

Question 11

The difference between goodwill and identifiable intangible assets is:

Accepted Answer

Goodwill is an intangible asset that cannot be separately identified, whereas identifiable intangible assets can be specifically identified and recognized separately from goodwill.

Question 12

After 1 January 2005,the position that applies in Australia to the amortisation of goodwill is:

Accepted Answer

After 1 January 2005, the position that applies in Australia to the amortisation of goodwill is that it is not required to be systematically amortised but is subject to an impairment test. This means that goodwill is not written off over a specific period but is subject to review for impairment on an annual basis or when there is an event that may indicate impairment. If there is an indication that the value of goodwill has been diminished, then it must be written down to reflect the new value.

Question 13

The initial patent period granted by the Australian Government and the potential legal life of trademarks and brand names,are respectively:

Accepted Answer

The answer of The initial patent period granted by the...

Question 14

The statement concerning the requirements of AASB 138 in relation to goodwill that is incorrect is:

Accepted Answer

AASB 138 requires goodwill to be tested for impairment annually, not every 5 years. Therefore, statement C is incorrect. Statement A is true as AASB 138 prohibits the recognition of internally generated goodwill. Statement B is also true as AASB 138 requires identifiable intangible assets to be separated from goodwill and accounted for separately. Statement D is incorrect as statement C is incorrect.

Question 15

Which of these provisions of AASB 138 is inconsistent with the asset recognition criteria of the Framework?

Accepted Answer

The answer of Which of these provisions of AASB 138...

Question 16

Which of the following is recommended as the preferred accounting treatment for excess on acquisition?

Accepted Answer

The answer of Which of the following is recommended as...

Question 17

AASB 138 requires disclosure of:

Accepted Answer

AASB 138 requires all of the above disclosure items. Disclosure of the aggregate amount of research and development costs recognised as an expense during the period is required to ensure users of financial statements have an understanding of the entity's investment in research and development. Disclosure of the amortisation methods used for intangible assets with finite lives is required to enable users of financial statements to assess the method used and the period over which the asset is amortised. A reconciliation of the opening and closing balances is required to help users of financial statements understand the changes in the balance of intangible assets during the period.

Question 18

Internally generated goodwill:

Accepted Answer

Internally generated goodwill is not recognised because of the difficulty of valuing it reliably. This is because goodwill arises out of factors such as reputation, customer relations, and employee skills, which can be difficult to measure objectively. Therefore, accounting standards require that only goodwill acquired in a business combination be recognised in financial statements, because the fair value of the acquired business can be measured more reliably.

Question 19

Which statement is correct? Under the current accounting standards applying to intangible assets:

Accepted Answer

According to the current accounting standards, only some internally developed intangible assets should be recognized in the accounts. Those that meet certain criteria, such as being separable, reliably measurable, and having a future economic benefit, can be recognized as an intangible asset on the balance sheet. Goodwill developed internally cannot be recognized as an intangible asset under these standards.

Question 20

Under AASB 138,the cost of identifiable intangible assets that are purchased separately is:

Accepted Answer

Under AASB 138, the cost of identifiable intangible assets that are purchased separately includes the purchase price plus any directly attributable costs necessary to prepare the asset for its intended use. This encompasses costs such as legal fees, consulting fees, and other costs directly related to the acquisition and preparation of the asset.

Quiz 11: Accounting for Intangible Assets