Deck 13: Intangible Assets

Question 1

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 2013: 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 2013 financial year, is:

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

Answer 1

A

Question 2

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.

Answer 2

D

Question 3

The two key characteristics of intangible assets are that they are identifiable and that they:

A) have physical substance
B) are monetary assets
C) represent current obligations of the entity
D) lack physical substance

Answer 3

D

Question 4

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 5

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

Question 6

Under IAS 38 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 7

According to the definition provided in IAS 38 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 8

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 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 Chartered Institute of Management Accountants (CIMA) has divided intangible resources into three components. Which is NOT one of these components?

A) human capital
B) structural capital
C) financial capital
D) relational capital

Question 11

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 12

Paragraph 63 of IAS 38 Intangibles, prohibits the recognition of the following internally generated identifiable intangibles:

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

Question 13

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 14

Under IAS 38 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 15

For an asset to be classified as an identifiable intangible, IAS 38 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 16

IAS 38 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 17

IAS 38 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.

Question 18

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 19

The measurement of fair value is determined in accordance with IFRS 13 Fair Value Measurement. IFRS 13 defines fair value as one that has all of the following conditions:

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

Question 20

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 21

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) cannot be measured
C) are not controlled by the entity
D) are too difficult to manage

Question 22

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

A) amortisation and impairment
B) inflation in value
C) interest expense
D) increment in value

Question 23

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

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

Question 24

Which of the following statements is correct?

A) IAS 38 requires disclosures about an entity's intangible assets, with disclosures being made on an asset by asset basis
B) Disclosures about the useful lives of intangibles are required with explanations being required where assets are assessed to have finite useful lives
C) Where the cost model is used, specific disclosures are required including assumptions made on estimating fair values
D) Separate disclosures are required for internally generated intangibles

Question 25

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

A) that the recognition of the asset is relevant to user decision making;
B) probability that future economic benefits will flow to the entity;
C) that the information about the asset is neutral;
D) a likelihood that the cost of the asset is verifiable.

Question 26

Which of the following is NOT a technique proposed by the Initial Accounting for Internally Generated Intangible Assets Discussion Paper to account for internally generated intangibles?

A) the use of a hypothetical business combination
B) the planned versus unplanned method
C) the use of indicators
D) the use of a substituted fair value

Question 27

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

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

Question 28

The Chartered Institute of Management Accountants (CIMA) divided intangible resources into three components comprising:

A) human capital
B) relational capital
C) structural capital
D) all of the options are correct