Question 1

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?

Accepted Answer

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

Question 2

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

Accepted Answer

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

Question 3

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.

Accepted Answer

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

Question 4

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?

Accepted Answer

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

Question 5

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

Accepted Answer

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

Question 6

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

Accepted Answer

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

When subsequent expenditure on intangible assets occurs the costs are:

Accepted Answer

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

Question 8

Which of the following statements is correct?

Accepted Answer

A)   AASB 138 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 9

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

Accepted Answer

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 10

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

Accepted Answer

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 11

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

Accepted Answer

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

Question 12

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

Accepted Answer

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 13

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:

Accepted Answer

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

Question 14

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

Accepted Answer

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

Question 15

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

Accepted Answer

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

Question 16

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

Accepted Answer

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 17

Which of the following statements is NOT correct?

Accepted Answer

A)   intangible assets are to be derecognised on disposal
B)   amortisation of an intangible with a finite useful life ceases when the asset becomes temporarily idle
C)   intangible assets are to be derecognised when there are no expected future benefits from the asset
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 18

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?

Accepted Answer

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

Question 19

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

Accepted Answer

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

Question 20

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?

Accepted Answer

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.

Exam 15: Understanding Australian Accounting Standards