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1. An intangible asset held at historical cost has been impaired in value. the fair value in use of the intangible asset is $10,000, the cost of selling is $500. the present value of the value in use of the intangible asset is estimated to be $9000.
the carrying amount of the intangible asset is $10500
What is the value of the impairment and account where the impairment will be recorded?2. scold co. made a profit before tax for the year ending 31st dec 2009 of $118000, this was arrived at after charging/crediting the following transactions?
i. depreciation on a revalued asset of $15000(depreciated based on original cost $10000)
ii. an asset previously revalued at $40000 was sold at a profit of $6000. the asset was revalued at 31st december 2008 and sold on 1st january 2009. scold co does not charge depreciation in th eyear of disposal.
what is the profit have been if scold co had followed the cost model of IAS 16?3.Snell purchased the assets of a software business for the cost of $1million. the book value of the assets acquired and fair values where appropriate) were as follows
book value fair value
$000 $000
plant and machinery 350
trademarks 29 45
purchased Goodwill 60
inventories 290 310under IFRS3 what is the good will arising on this purchase?
4. can we say a property leased to another group company and gains reported on investment property are held in a seperate revaluation reserve is an investment property in an entitys financial statements?
The idea of this forum is for you to ask me questions like “I don’t understand the answer, can you explain it to me?”
That is, you are expected to try the question for yourself, arrive at an answer, compare it with the printed solution and then (and only then) post the question to me with a comment like “How is this answer $YYYYY arrived at because I arrived at $XXXXX and here is what I did”
The intention of the forum is NOT to set me test questions!
i tried solving it but do not know how to go about it,this is because i dont have a good accounting background,so i needed your help in solving these so i can use that idea to solve others. thank you.
Q1 … you appear to be confusing the use of the expression ‘fair value’
‘… fair value in use …’
‘… the present value of value in use …’
Do I assume that the asset is carried at $10,500 and we would incur $500 were we to sell it?
So, carrying value is $10,500
Pv of value in use is $9,000
Net realisable value is $10,000 ($10,500 – $500)
So ‘recoverable amount’ is $10,000
Therefore we need to impair by $500 (Dr profit or loss account and Cr TNCA)
This is all covered in the free course notes!
Q2 … point (I) does not make sense and point (ii) is silly. You need to look at both again
Q3 … I can’t make any sense of the figures – is 350,000 plant and machinery book value or fair value?
The free course notes cover this issue of calculating goodwill – have you even looked at the free course notes – and I go through the topic fully in the recorded videos
Q4 … yes, but not when it comes to consolidating
1.Atlantic ocean co has the following balances in its financial statements:
$000
Goodwill 350
intangibles 400
plant 475
Property 1150
other net assets 215
following a period of losses, the recoverable amount of the division is deemed to be $2million.
A recent valuation of the building showed that the building has a market value of $1.25 million. the other net assets are at their recoverable amount. the company uses the cost model for valuing property,plant and equipment.
what is the balance on property and plant following the review?2. getting well is a public limited company with a reporting date of 31december 2010 and functional currency of dollars($). it has the following transactions in dinars:
a) on 1 January 2010 a loan of 12million dinars was contracted from bank. it repaid 3million dinars to the bank on 30th June 2010b) on 31st june 2010,it purchased land at a cost of 30million dinars. the land is measured using the cost model.
exchange rates are as follows:
dinars : $1
1/12010 2
30/6/2010 3
31/12/2010 2average rate for the ended 31/12.2010
what is the total profit/loss arising on the loan transaction in the year ended 31st dec 2010 and the carrying amount of the land as at 31st december 2010?3. D is a large paper manufacturing company. the companys finance director is working on the published accounts for the year ended 31st march 20X3. the chief accountant has prepared the following list of problems which have to be resolved before the statements can be finalised.
i. possible investment property(IAS40)
The company decided to take advantage of depressed property prices and purchased a new office building in the centrer of Westville. this was purchased with the intention of the building being resold at a profit within 5years. in the meantime ,the company is using the property to house the administrative staff from the westown factory ubtill such time as their own offices can be repaired. it is anticipated that this will take at least 9months. the managing director has suggested that the building should not be depreciatedii. The company paid the engineering department at Northtown university a large sum of money to design a new pulping process which will enable the use of cheaper raw materials.
this process has been successfully tested in the universitys laboratories and is almost certain to be introduced at D’s pulping plant within the nest few months.
The company paid a substantial amount to the universitys biology department to develop a new species of tree which could grow more quickly and therefore enable the companys forest to generate more wood for paper manufacturing. The project met with some success in that the new tree was developed. unfortunately it was prone to diseases and the cost of the chemical sprays needed to keep the wood healthy rendered the tree uneconomic.Required:
Explain how each of these matters should be dealt with in published accounts for the year ended 31st march 20X3 in light of the accounting standards referred to above?
assume that the amounts are material in every case.
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