Question 1

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

A)  negative goodwill 
B)  excess on acquisition 
C)  goodwill 
D)  both A and B 
A)  negative goodwill 
B)  excess on acquisition 
C)  goodwill 
D)  both A and B D

Question 2

AASB 138 requires disclosure of:

Accepted Answer

A)  the aggregate amount of research and development costs recognised as an expense during the period 
B)  the amortisation methods used for intangible assets with finite lives 
C)  a reconciliation of the opening and closing asset balances showing additions, revaluations, impairment losses and amortisation 
D)  all of the above 
A)  the aggregate amount of research and development costs recognised as an expense during the period 
B)  the amortisation methods used for intangible assets with finite lives 
C)  a reconciliation of the opening and closing asset balances showing additions, revaluations, impairment losses and amortisation 
D)  all of the above D

Question 3

Which of these accounting standards applies to goodwill?

Accepted Answer

A)  AASB 3 
B)  AASB 136 
C)  AASB 138 
D)  All of the above 
A)  AASB 3 
B)  AASB 136 
C)  AASB 138 
D)  All of the above D

Question 4

Discuss the arguments for and against each of the following:
i.Writing off goodwill immediately as an expense in the income statement
compared to recognising it as an asset in the balance sheet.
ii.Systematically amortising goodwill that has been recognised as an asset
compared to not amortising it.

Accepted Answer

i. Writing off goodwill immediately as a

Question 5

Which of these is not correct under AASB 138 concerning the measurement of intangible assets subsequent to acquisition?

Accepted Answer

A)  If the revaluation model is used, amortisation is not required even if the useful life of the asset is finite 
B)  With both the cost and the revaluation models, all assets should be regularly tested for impairment 
C)  If the cost model is used, amortisation is required if the useful life of the asset is finite 
D)  The revaluation model is only permitted to be used if there is an active market for the asset 
A)  If the revaluation model is used, amortisation is not required even if the useful life of the asset is finite 
B)  With both the cost and the revaluation models, all assets should be regularly tested for impairment 
C)  If the cost model is used, amortisation is required if the useful life of the asset is finite 
D)  The revaluation model is only permitted to be used if there is an active market for the asset

Question 6

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

Accepted Answer

A)  is consistent with the treatment of these costs for income tax purposes 
B)  is allowable provided that a future economic benefit exists 
C)  is allowable provided that the cost is material 
D)  all of the above 
A)  is consistent with the treatment of these costs for income tax purposes 
B)  is allowable provided that a future economic benefit exists 
C)  is allowable provided that the cost is material 
D)  all of the above

Question 7

Compare the costs likely to be recorded for internally developed patents with those associated with a patent purchased in an arm's length transaction.

Accepted Answer

The answer of Compare the costs likely to be recorded...

Question 8

Purchased computer software should be:

Accepted Answer

A)  recognised as an asset and recorded at cost 
B)  amortised over its useful life 
C)  subject to an impairment test 
D)  all of the above 
A)  recognised as an asset and recorded at cost 
B)  amortised over its useful life 
C)  subject to an impairment test 
D)  all of the above

Question 9

The difference between goodwill and identifiable intangible assets is:

Accepted Answer

A)  goodwill does not decline in value 
B)  goodwill cannot be separately identified 
C)  the cost of goodwill fails to meet the asset recognition criteria 
D)  all are differences between goodwill and identifiable intangible assets 
A)  goodwill does not decline in value 
B)  goodwill cannot be separately identified 
C)  the cost of goodwill fails to meet the asset recognition criteria 
D)  all are differences between goodwill and identifiable intangible assets

Question 10

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

Accepted Answer

A)  intangible assets are inherently inert and their value can grow or dissipate quickly 
B)  intangible assets may be developed internally 
C)  intangible assets do not have physical substance 
D)  all of the above are equally important reasons why accounting for intangible assets is more difficult than accounting for other assets 
A)  intangible assets are inherently inert and their value can grow or dissipate quickly 
B)  intangible assets may be developed internally 
C)  intangible assets do not have physical substance 
D)  all of the above are equally important reasons why accounting for intangible assets is more difficult than accounting for other assets

Question 11

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

Accepted Answer

A)  recognised as a charge in the statement of comprehensive income 
B)  recognised as a charge to equity 
C)  amortised over a period not exceeding 20 years 
D)  all of the above 
A)  recognised as a charge in the statement of comprehensive income 
B)  recognised as a charge to equity 
C)  amortised over a period not exceeding 20 years 
D)  all of the above

Question 12

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

Accepted Answer

A)  it prohibits the recognition of internally generated goodwill 
B)  it distinguished between identifiable intangible assets and goodwill 
C)  it requires goodwill to be tested for impairment at least every 5 years 
D)  none of the requirements is incorrect 
A)  it prohibits the recognition of internally generated goodwill 
B)  it distinguished between identifiable intangible assets and goodwill 
C)  it requires goodwill to be tested for impairment at least every 5 years 
D)  none of the requirements is incorrect

Question 13

AASB 138 prohibits recognising as intangible assets all internally generated:

Accepted Answer

A)  costs of patents 
B)  brand names costs 
C)  trademark costs 
D)  all of the above 
A)  costs of patents 
B)  brand names costs 
C)  trademark costs 
D)  all of the above

Question 14

Internally generated goodwill:

Accepted Answer

A)  is not recognised because it does not provide future economic benefits 
B)  is not recognised because of the difficulty of valuing it reliably 
C)  is recognised because it provides a future economic benefit 
D)  A and B are incorrect 
A)  is not recognised because it does not provide future economic benefits 
B)  is not recognised because of the difficulty of valuing it reliably 
C)  is recognised because it provides a future economic benefit 
D)  A and B are incorrect

Question 15

The recommended treatment under AASB 138 and Interpretation 132 of i.planning costs and ii.graphics and content costs,incurred internally by a company to develop its website is:

Accepted Answer

A)  write-off both as expenses 
B)  i. expense: ii. recognise as an intangible asset if all the requirements of AASB 138 are met 
C)  recognise both as intangible assets if all the requirements of AASB 138 are met for both 
D)  it depends on the reasons the website was developed, e.g., was it primarily to promote and advertise the company's products? 
A)  write-off both as expenses 
B)  i. expense: ii. recognise as an intangible asset if all the requirements of AASB 138 are met 
C)  recognise both as intangible assets if all the requirements of AASB 138 are met for both 
D)  it depends on the reasons the website was developed, e.g., was it primarily to promote and advertise the company's products?

Question 16

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

Accepted Answer

A)  capitalised 
B)  expensed and reinstated 
C)  expensed in the period incurred 
D)  none of the above 
A)  capitalised 
B)  expensed and reinstated 
C)  expensed in the period incurred 
D)  none of the above

Question 17

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

Accepted Answer

A)  Reviewing the unamortised balance of goodwill annually and, to the extent it is no longer supported by probable future economic benefits, writing it down 
B)  Recognising purchased goodwill as an asset 
C)  Not recognising internally generated goodwill as an asset when the market value of an entity can be measured reliably 
D)  Amortising goodwill 
A)  Reviewing the unamortised balance of goodwill annually and, to the extent it is no longer supported by probable future economic benefits, writing it down 
B)  Recognising purchased goodwill as an asset 
C)  Not recognising internally generated goodwill as an asset when the market value of an entity can be measured reliably 
D)  Amortising goodwill

Question 18

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

Accepted Answer

A)  the purchase price plus all cost directly attributable to preparing the asset for its intended use 
B)  fair value at the date of acquisition 
C)  the sum of expenditure incurred from the date the intangible assets first meet the recognition criteria 
D)  none of the above 
A)  the purchase price plus all cost directly attributable to preparing the asset for its intended use 
B)  fair value at the date of acquisition 
C)  the sum of expenditure incurred from the date the intangible assets first meet the recognition criteria 
D)  none of the above

Question 19

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

A)  Calculate the present value of the profit stream the purchasing company would acquire and deduct from it the fair value of the net assets gained 
B)  Calculate the discounted value of 'super-profits' which are the difference between the expected annual operating profit and normal profit 
C)  Calculate the difference between the price paid for the business and the fair value of the identifiable net assets acquired 
D)  None of the above, i.e., all are methods of estimating the amount of goodwill that exists in a business in negotiations leading up to its sale 
A)  Calculate the present value of the profit stream the purchasing company would acquire and deduct from it the fair value of the net assets gained 
B)  Calculate the discounted value of 'super-profits' which are the difference between the expected annual operating profit and normal profit 
C)  Calculate the difference between the price paid for the business and the fair value of the identifiable net assets acquired 
D)  None of the above, i.e., all are methods of estimating the amount of goodwill that exists in a business in negotiations leading up to its sale

Question 20

Explain and discuss the application of AASB 138 in its proposals to account for research and development expenditure.

Accepted Answer

The answer of Explain and discuss the application of AASB...

Exam 11: Accounting for Intangible Assets

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

AASB 138 requires disclosure of:

Which of these accounting standards applies to goodwill?

Which of these is not correct under AASB 138 concerning the measurement of intangible assets subsequent to acquisition?

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

Compare the costs likely to be recorded for internally developed patents with those associated with a patent purchased in an arm's length transaction.

Purchased computer software should be:

The difference between goodwill and identifiable intangible assets is:

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

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

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

AASB 138 prohibits recognising as intangible assets all internally generated:

Internally generated goodwill:

The recommended treatment under AASB 138 and Interpretation 132 of i.planning costs and ii.graphics and content costs,incurred internally by a company to develop its website is:

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

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

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

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?

Explain and discuss the application of AASB 138 in its proposals to account for research and development expenditure.

Institutional Arrangements for Setting Accounting Standards in Australia

A Conceptual Framework: Scope, reporting Entity and the Objective of Financial Report

A Conceptual Framework: the Fundamentals of General Purpose Financial Reporting

A Conceptual Framework: Recognition and Measurement of the Elements of Financial Statements

The Choice of Accounting Methods

The Balance Sheet: an Overview

Accounting for Current Assets

Accounting for Property, plant and Equipment

Accounting for Company Income Tax

Accounting for Investments

Accounting for Leases

Accounting for Employee Benefits

Accounting for Financial Instruments

Equity

The Income Statement

The Cash Flow Statement

Financial Reporting: Segment Reporting, value Added Statements, highlights Statements and Future-Oriented Financial Information

Further Financial Reporting Issues

Accounting for the Extractive Industries

Accounting for Real Estate Development and Construction Contracts

Accounting for Agricultural Activity

Accounting for Superannuation Plans

Accounting for Financial Institutions

Financial Reporting in the Public Sector

International Accounting Standards, harmonisation and Convergence

Foreign Currency Translation

Accounting for Corporate Social Responsibilities

Ethics in Accounting

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