Deck 11: Intangible Assets

Question 1

Which of the following intangibles may be capitalised as an asset by an entity?

A)Goodwill acquired as part of a business combination.
B)Internally generated mastheads.
C)Publishing titles developed within the entity.
D)Customer lists developed by the entity's marketing division.

Answer 1

A

Question 2

In accordance with AASB 3 Business Combinations,if an intangible asset is acquired in a business combination,the cost of the asset is its:

A)fair value at the combination date.
B)fair value at the acquisition date.
C)current replacement cost at the acquisition date.
D)discounted present value at the acquisition date.

Answer 2

B

Question 3

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date is known as the:

A)fair value.
B)cost.
C)net present value.
D)realisable value.

Answer 3

A

Question 4

Which of the following items would not meet the criterion of separability for identifiable intangible assets?

A)Licence
B)Patent
C)Ongoing training or recruiting programs
D)Brand name

Question 5

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 the cost of the intangible asset?

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 6

The application of research findings to a plan for the production of new materials before the start of commercial production is described as:

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

Question 7

For an asset to be defined as an identifiable intangible,AASB 138 Intangible Assets 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 be reliably measurable.

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

Question 8

Which of the following statements is incorrect?

A)Intangible assets are fundamentally the same as tangible assets for recognition purposes.
B)Financial assets such as loans and receivables are excluded from being classified as intangible assets.
C)Separability tests whether an entity can divide an asset from other assets and transfer it to another entity.
D)Non-physical assets cannot be recognised unless they are identifiable.

Question 9

Money held and assets to be received in fixed or determinable amounts of money are referred to as:

A)non-monetary assets.
B)current assets.
C)monetary assets.
D)non-current assets.

Question 10

The unique characteristics of intangible assets raised by Lev (2001)do not include which of the following?

A)There is a high degree of certainty regarding the future benefits of intangible assets.
B)Intangible assets may have network effects.
C)Intangibles may be more difficult to manage and operate than tangible assets.
D)The relationship between the investment and return is skewed.

Question 11

The two gaps that frustrate attempts to recognise intangible assets are:

A)time gap and expectation gap.
B)outlay gap and correlation gap.
C)relevance gap and reliability gap.
D)time gap and correlation gap.

Question 12

From an accounting perspective,expenditure on development is:

A)expensed as incurred.
B)capitalised as an intangible asset.
C)regarded as a contingent asset and not capitalised.
D)recognised directly as a part of equity.

Question 13

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 14

Assets that could potentially meet the identifiability criteria for intangible assets include which of the following?

A)Franchise agreements
B)Plays,operas and ballets
C)Internet domain names
D)All of the above

Question 15

An identifiable non-monetary asset without physical substance is known as a/an:

A)tangible asset.
B)intangible asset.
C)non-physical asset.
D)non-current asset.

Question 16

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

A)separability.
B)reliability.
C)relevance.
D)lack of physical substance.

Question 17

Paragraph 63 of AASB 138 Intangible Assets,prohibits the recognition of which of the following internally generated identifiable intangibles?

A)Publishing titles
B)Customer lists
C)Mastheads
D)All of the above

Question 18

The cost of an intangible asset is comprised of the purchase price:

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

Question 19

According to AASB 138 Intangible Assets,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 20

Which of the following is an example of a development activity?

A)Search for new knowledge
B)Search for alternative materials
C)Design of pre-production prototypes
D)Search for alternative processes

Question 21

Under AASB 138 Intangible Assets,an intangible asset with an indefinite useful life is:

A)not able to be recognised 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 22

AASB 138 Intangible Assets,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 23

Amounts spent on intangible assets cannot be capitalised if they have previously been expensed.

Question 24

Renouf 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 during the year ended 30 June 2014: research salaries $50 000; research materials $30 000; re-development of the extrusion plant $400 000; 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 2014,is:

A)$30 000.
B)$50 000.
C)$80 000.
D)$425 000.

Question 25

When an intangible asset is separately acquired,the probability test will always be met as the price paid for the asset automatically takes into account the probability of the expected benefits being received.

Question 26

Which of the following statements is incorrect?

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 a finite useful life ceases 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.

Question 27

When subsequent expenditure on intangible assets are incurred,the costs are:

A)debited to the retained earnings account.
B)transferred to a revaluation reserve account.
C)capitalised as part of the cost of the asset.
D)immediately expensed,rather than being capitalised.

Question 28

Subsequent expenditures on intangibles may be capitalised as part of the cost of the intangible item.

Question 29

Subsequent to initial recognition of an intangible asset,an entity may choose to measure the asset using either the:

A)gross model or revaluation model.
B)cost model or cash flow model.
C)cost model or revaluation model.
D)net model or gross model.

Question 30

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 market value method
B)Substituted future value method
C)Hypothetical business combination method
D)Future benefit method

Question 31

Physical form is not essential to the existence of an asset.

Question 32

If the cost of an intangible asset cannot be measured reliably but the fair value can be determined,under AASB 138 Intangible Assets it can be recognised.

Question 33

The recognition criteria for intangible assets under AASB 138 Intangible Assets is that same as in AASB 116 Property,Plant and Equipment.

Question 34

Customer service capability does not qualify for recognition as an intangible asset because it does not meet the identifiability criterion.

Question 35

AASB 138 Intangible Assets,requires that which of the following items 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 36

Lewis 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 2014: researcher's salary $5000,research consumables $3000,re-development of the detecting equipment $4000 and final adjustments to the detecting equipment $2500.The amount to be capitalised by this company as an intangible asset,for the 2014 financial year,is:

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

Question 37

Intangible assets acquired in a business combination may be initially recognised at fair value.

Question 38

If an intangible asset is allocated to an entity via a government grant,it can initially be recognised at fair value.

Question 39

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

A)Creativity
B)Corporate reputation
C)Employee loyalty
D)Education

Question 40

Goodwill may only be recognised as an intangible asset when it is acquired as part of a business combination.

Question 41

Physical capital is a separate component of intellectual capital.

Question 42

Financial statements do not recognise any attempts by management to increase the human capital of the organisation.

Question 43

AASB 138 Intangible Assets requires that disclosures for each class of intangibles be distinguished from other disclosures.

Question 44

The 2008 Discussion Paper on intangible assets published by the AASB proposes dividing internally generated intangibles into planned and unplanned assets.

Question 45

Subsequent to initial recognition,AASB 138 Intangible Assets allows intangible assets to be measured under the cost model or revaluation model.

Question 46

Amortisation of an intangible with a finite useful life does not cease when the asset becomes temporarily idle or is retired from active use.

Question 47

Where an intangible asset has an indefinite useful life,there is no amortisation expense recorded.

Question 48

When determining the depreciable amount of an intangible asset with a finite useful life,the residual value is always assumed to be zero.

Question 49

In general,the principles of amortisation of intangible assets are the same as those for depreciating property,plant and equipment.

Question 50

The factors that should be considered in determining the useful life of an intangible asset includes the expected use of the asset by the entity and whether the asset could be managed efficiently by another management team.