Deck 6: Intangible Assets

Question 1

Under the revaluation method of measuring an intangible, the asset is carried at fair value and subject to charges for:

A) interest.
B) inflation.
C) improvements.
D) amortisation and impairment.

Answer 1

D

Question 2

Cost incurred on intangible assets subsequent to initial expenditure are:

A) recognised directly in the revaluation reserve account.
B) transferred to the retained earnings account.
C) expensed immediately.
D) capitalised.

Answer 2

C

Question 3

Bankstown Limited was involved in a highly successful plastics manufacturing business. It commenced a project to design a more efficient extrusion system for its plastic pipes. The following outlays occurred: September: researcher salaries $30 000; October: research materials $40 000; November: re-development of the extrusion plant $250 000; December: final adjustments to the extrusion plant $25 000. The amount to be expensed by Bankstown Limited at the end of the financial year, 31 December, is:

A) $30 000
B) $70 000
C) $250 000
D) $275 000

Answer 3

B

Question 4

The cost of an intangible asset is comprised of the fair value of the consideration:

A) plus indirect costs.
B) less directly attributable costs.
C) plus directly attributable costs.
D) less legal costs incurred in the purchase.

Question 5

Jameson Limited was involved in a mining exploration business. It commenced a project to design more efficient opal detecting equipment. The following expenditures occurred during the financial year ended 30 June 2022: researcher's salary $50 000; research consumables $30 000; re-development of the detecting equipment $40 000; final adjustments to the detecting equipment $12 500. The amount to be capitalised by this company as an intangible asset, for the 2022 financial year, is:

A) $80 000
B) $90 000
C) $12 500
D) $52 500

Question 6

The measurement of fair value is determined in accordance with AASB 13 Fair Value Measurement. AASB 13 defines fair value as one that has all of the following conditions: $$\begin{array} { | l | l | l | l | l | } \hline & \text { I } & \text { II } & \text { III } & \text { IV } \\\hline \begin{array} { l } \text { The price that would be received to sell arI asset or paid to } \\\text { traresfe a liability }\end{array} & \text { Yes } & \text { Yes } & \text { No } & \text { Yes } \\\hline \text { Is arl orderly trarsaction between market participarts } & \text { No } & \text { Yes } & \text { No } & \text { Yes } \\\hline \text { Based or the measurement date. } & \text { Yes } & \text { Yes } & \text { Yes } & \text { No } \\\hline\end{array}$$

A) I.
B) II.
C) III.
D) IV.

Question 7

The three key characteristics of intangible assets are: $$\begin{array} { | l | l | } \hline \text { I } & \text { Expected future econorric benefit } \\\hline \text { II } & \text { Lack of physical substarice } \\\hline \text { III } & \text { Identifiable } \\\hline \text { IV } & \text { Physical substarce } \\\hline \text { V } & \text { Non-monetary in nature } \\\hline\end{array}$$

A) I, II and III
B) I, III, and IV
C) III, IV, and V
D) II, III, and V

Question 8

Items such as market knowledge, effective advertising programs, fundraising capabilities and trained staff are NOT regarded as assets because they:

A) are monetary items.
B) are not controlled by the entity.
C) cannot be reliably measured.
D) are too difficult to manage.

Question 9

The recognition criteria that an asset must meet before it may be recognised and presented in the financial statements includes:

A) results from a past event.
B) having physical substance.
C) relevant to management decision making.
D) verifiability.

Question 10

When an intangible asset is acquired by an exchange of assets, which of the following measures will need to be considered in the determination of cost?

A) The initial cost of the asset given up.
B) The fair value of the asset given up.
C) The replacement value of the asset received.
D) The carrying amount of the asset received.

Question 11

Paragraph 63 of AASB 138 Intangibles, prohibits the recognition of the following internally generated identifiable intangibles: $$\begin{array} { | l | l | l | l | l | } \hline&I&II&III&IV\\\hline \text { Brands } & \text { No } & \text { No } & \text { Yes } & \text { No } \\\hline \text { Mastheads } & \text { No } & \text { Yes } & \text { Yes } & \text { Yes } \\\hline \begin{array} { l } \text { Publishing } \\\text { titles }\end{array} & \text { No } & \text { No } & \text { Yes } & \text { Yes } \\\hline \begin{array} { l } \text { Customer } \\\text { lists }\end{array} & \text { No } & \text { Yes } & \text { Yes } & \text { No } \\\hline\end{array}$$

A) I.
B) II.
C) III.
D) IV.

Question 12

A key characteristic that separates intangible assets from assets such as property, plant and equipment is:

A) length of useful life.
B) separability.
C) reliability.
D) lack of physical substance.

Question 13

Unless acquired under a business combination, intangible assets must be initially measured using which of the following measurement approaches?

A) Net present value.
B) Cost.
C) Diminishing value.
D) Fair value.

Question 14

AASB 138 Intangibles requires that an asset meet which of the following criteria to be classified as an identifiable intangible?
I. It arises from a contractual or legal right.
II. It is separable from the entity.
III. Its cost must be reliably measurable.
IV. Its fair value must be able to be reliably measured.

A) I or IV only.
B) I or II only.
C) II or III only.
D) I or III only.

Question 15

The original and planned investigation undertaken with the prospect of gaining new knowledge is described as:

A) research.
B) exploration.
C) development.
D) investigation.

Question 16

Which of the following assets meets the identifiability criteria for recognition as an identifiable intangible asset that can be recorded as acquired in a business combination?

A) Royalty agreements.
B) Customer base.
C) Continuing development programs.
D) Strong and favourable supplier relations.

Question 17

Goodwill is distinguished from other intangible assets due to which of the following characteristic?

A) monetary nature.
B) physical substance.
C) identifiability.
D) separability.

Question 18

AASB 138 Intangibles, requires goodwill to only be recognised as an asset if it:

A) is internally generated.
B) is acquired as part of a business combination.
C) does not exceed its internally recorded cost.
D) arises as a result of creating new assets within the normal business operations.

Question 19

Which of the following assets is regarded as meeting the identifiability criteria for recognition as an identifiable intangible asset that may be acquired in a business combination?

A) Newspaper mastheads.
B) Customer service capability.
C) Outstanding credit ratings.
D) Presence in geographic locations.

Question 20

AASB 138 Intangibles, defines the 'research' phase of the generation of an asset as:

A) the use of research findings to create a substantially improved product.
B) using knowledge to materially improve a manufacturing device.
C) the application of knowledge to a design for new production processes.
D) original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge or understanding.

Question 21

Under AASB 138 Intangibles, an intangible asset with an finite useful life is:

A) not able to be recognised by an entity as an asset.
B) not subject to annual amortisation charges.
C) amortised using the straight-line method over a period of no more than 20 years.
D) amortised systematically over its useful life.

Question 22

Which of the following statements is correct?

A) Separate disclosures are required for internally generated intangibles.
B) AASB 138 requires disclosures about an entity's intangible assets to be made on an asset by asset basis.
C) Disclosures about the useful lives of intangibles are required with explanations being required where assets are assessed to have finite useful lives.
D) Where the cost model is used, specific disclosures are required including assumptions made on estimating fair values.

Question 23

AASB 138 Intangibles requires which of the following items to be disclosed in relation to intangibles?

A) Whether the life of the intangible is finite or indefinite.
B) The amortisation method used for intangibles with a finite life.
C) A reconciliation of the beginning and ending carrying amounts for the reporting period.
D) All of the options are required disclosures.

Question 24

AASB 138 Intangibles, requires that an intangible asset with an indefinite life:

A) be amortised across its useful life.
B) be amortised across a period of no greater than 10 years.
C) not be amortised in periods when it has been properly maintained.
D) not be subject to amortisation charges.