step 3: 7. Intangible Assets and Inventories

an intangible asset is an _____, _______ asset with no physical substance

identifiable

non-monetary

what does identifiable mean

• can be sold separately without selling the business

• arises from a contract

examples of intangible assets

goodwill

development costs

patents

computer software

trademarks

goodwill is the ______ payment made and can be defined as the amount paid over and above the ___ value of the ______net assets and liabilities acquired

(like a premium you are willing to pay for the business)

excess

fair

identifiable

_____ generated goodwill is not recognised

internally

purchased goodwill, acquired by buying another entity is capitalised

t/f

t

research is the original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding

research is the original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding

development is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials etc, before the start of production

development is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials etc, before the start of production

examples of research activities

activities aimed at gaining new knowledge

searching for information

examples of development activities

design

with research and development you are applying the ____ concept

accruals

research is ____recognised as an intangible asset, but shown as an ____in SPL

no certainty of future economic benefits

not

expense

development ___ be recognised as an intangible asset when all PIRATE criteria are met

must

PIRATE

Probable future economic benefits

Intention to complete, and use/sell

Resources adequate to complete

Ability to use/sell

Technical feasibility of completing asset

Expenditure can be measured reliably

PIRATE

Probable future _____benefits

______ to complete, and use/sell

Resources adequate to complete

Ability to use/sell

______feasibility of completing asset

Expenditure can be measured _____

economic

Intention

Technical

reliably

amortisation

depreciation for intangible assets

indefinite life on intangible assets :

no foreseeable limit for when asset can be used

intangible asset is not amortised

useful life re-assessed every year

impairment review conducted annually

intangible asset with an indefinite life is not ________

amortised

finite life on intangible assets

amortise over the usefull life

residual value of intangible assets is normally ___

0

impairment - an asset is impaired if it’s carrying amount is greater than its recoverable amount

impairment loss is the amount by which the carrying amount of an asset _____its recoverable amount

exceeds

impairment indicators: external sources

• significant fall in the assets market value

• increases in interest rates (bad economy)

impairment indicators: internal sources

• damage in asset

• fall in cash flows

accounting for impairment cost, when the asset is carried at historical cost

accounting for impairment cost, when the asset is carried at revalued amount

NRV =

selling price - selling costs - costs to complete

cost =

purchase prince + directly attrituble costs

LIFO (Last In, First Out) is ______ by IAS

prohibited

LIFO (Last In, First Out)

assumed most recent purchases are used first

therefore, the items in inventory are the earliest purchases

FIFO (First In, First Out)

items used in the order they are recieved

therefore items in inventory are the most recent purchases

AVCO (Weighted Average)

total cost of items in inventory / total number of items