Deck 9: Intangible Assets

Question 1

Which of the following is a technique proposed by the Initial Accounting for Internally Generated Intangible Assets Discussion Paper to account for internally generated intangibles?

A)hypothetical future value method
B)substituted fair value method
C)planned versus unplanned method
D)expected benefit method

Answer 1

C

Question 2

AASB 138 Intangibles,requires that the following items in relation to intangibles,each be disclosed separately:

A)the opening balance of each intangible
B)the closing balance of each intangible
C)any impairment losses reversed in profit or loss during the period
D)all amounts of intangibles acquired during the period.

Answer 2

C

Question 3

Wojtowicz Limited was involved in a mining exploration business.It commenced a project to design more efficient gold detecting equipment.The following expenditures occurred during the financial year ended 20X1: Researcher's salary $5000 Research consumables $3000 Re-development of the detecting equipment $4000 Final adjustments to the detecting equipment $2500.The amount to be capitalised by this company as an intangible asset,for the 20X1 financial year,is:

A)$6500
B)$8000
C)$11 500
D)$14 500.

Answer 3

A

Question 4

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

A)discounted cash flows
B)fair value
C)net present value
D)cost.

Question 5

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

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

Question 6

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

A)be amortised across its useful life
B)be amortised across a period of no greater than 20 years
C)not be amortised in periods when it is been properly maintained
D)not be subject to amortisation charges.

Question 7

Under AASB 138 Intangibles,goodwill may only be recognised as an asset if it:

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

Question 8

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 that cost?

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

Question 9

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)customer service capability
B)newspaper mastheads
C)favourable government relations
D)presence in geographic locations.

Question 10

The characteristic that distinguishes the goodwill from other intangible assets is:

A)identifiability
B)its nature as a monetary asset
C)that is has a physical embodiment
D)it can be separated from the entity and sold individually.

Question 11

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

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

Question 12

For the purposes of determining the fair value of an asset in an active market,an active market is defined in AASB 138 Intangibles,as one that has all of the following conditions:
I II III IV
The items traded in the market are homogeneous Yes Yes No Yes
Willing buyers and sellers can normally be found No Yes No Yes
Prices are available to the public Yes No Yes Yes

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

Question 13

Under AASB 138 Intangibles,an intangible asset with an indefinite 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 using the reducing balance method over a period not exceeding 5 years.

Question 14

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

A)customer base
B)royalty agreements
C)ongoing recruitment programs
D)strong and favourable employee relations.

Question 15

Parsons 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: January Research salaries $50 000 February Research materials $30 000 March re-development of the extrusion plant $400 000 April Final adjustments to the extrusion plant $25 000.The amount to be expensed by this company at the end of the financial year,30 June,is:

A)$30 000
B)$50 000
C)$80 000
D)$480 000.

Question 16

According to the definition provided in AASB 138 Intangibles,activities undertaken in the 'research' phase of the generation of an asset may include:

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

Question 17

What does Tobin's Q measure?

A)The difference between the book value and market value of a company
B)The rate of change in a company's share price across a year
C)The extent of the contingent liabilities of a business
D)The total annual size of a company's cash inflows and outflows.

Question 18

Which of the following statements is not correct?

A)intangible assets are to be derecognised when there are no expected future benefits from the asset
B)amortisation of an intangible with a finite useful life does not cease when the asset becomes temporarily idle.
C)amortisation of an intangible with an indefinite life does not cease when the asset is retired from active use.
D)gains or losses on disposal are calculated as the difference between the proceeds on disposal and the carrying amount at point of sale,with amortisation calculated up to the point of sale

Question 19

Paragraph 63 of AASB 138 Intangibles,prohibits the recognition of the following internally generated identifiable intangibles:
I II III IV
Brands No No No Yes
Mastheads No Yes Yes Yes
Publishing titles No No Yes Yes
Customer lists No Yes No Yes

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

Question 20

Which of the following is not a component of organisational capital?

A)Culture
B)Base value
C)Process capital
D)Innovation capital

Question 21

Discuss the lack of physical substance as a key characteristic in the definition of an intangible asset.

Question 22

Explain how an intangible asset acquired in an exchange of intangibles is valued.

Question 23

Identify and discuss the two criteria for the recognition of intangibles.

Question 24

Discuss the criterion of separability as a distinguishing feature of an intangible asset.

Question 25

Explain the principles relating to the amortisation of intangible items.