Intangible Assets Quiz Questions ANS Essay

1355 Words Apr 27th, 2015 6 Pages
ADVANCED FINANCIAL ACCOUNTING 260
INTANGIBLE ASSETS
QUIZ QUESTIONS
1. List two assets which would not meet the ‘identifiable’ aspect of the definition of an intangible asset. (2 Marks)

Answer: Goodwill and Knowledge. These items are either not separable from the company or do not meet the definition of an asset because the benefits they represent cannot be controlled by the entity.

2. Intangible assets acquired via a separate acquisition are always recognised. Why? (2 Marks)

The probability recognition criterion is always considered to be satisfied for separately acquired intangible assets.
The price paid for the asset automatically takes into account the probability of expected benefits to be received.

3. How is an intangible
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15. List in detail two factors which an entity would consider in determining the useful life of an intangible asset. (2 Marks) The stability of the industry in which the asset operates and changes in the market demand for the products or services output from the asset;
Expected actions by competitors or potential competitors.

16. Identify one circumstance in which the residual value of an intangible asset with a finite useful life may be more than zero. (1 Mark)

Answer: There is a commitment by a third party to purchase the asset at the end of its useful life.

17. What is the key difference between the research phase and the development phase of an internal project? (1 Mark)

Answer: No intangible asset arising from research shall be recognised. Expenditure on research shall be recognised as an expense when it is incurred. An intangible asset arising from development can be recognised only if all the six conditions are met.

18. XYZ Ltd has developed a new polymer for powder coating metal giving far superior weather proofing. The company has been granted a 7 year patent protecting its process and expects to be the market leader in this field for at least 1o years. What is the useful life of the process? Why? (2 Marks)

Answer: The useful life is 7 years.

Reason: para 90. One of the factors that should be considered in determining the useful life of intangible assets is the period of control over the asset and legal or similar limits on the use of the

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