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MikeLittle.
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- May 3, 2017 at 12:34 pm #384560
Hi Mr Mike I have a question relating Intangible asset in consolidation
The question has been taken from Becker revision question kit page number 115
Salva owns the registration of a popular internet domain name.the registration, which had a negligible cost, has a five year remaining life (at the date of acquisition):however, it is renewable indefinitely at a nominal cost.At the date of acquisition the domain name was valued by a specialist company at 20$ million
When i solved this question i recognized it in the following way
accounting year from 1 october 2015 to 30 September 2016
Pandra acquired salva on 1 april 2016
Ad
20000
DR
20000-(2000)
depreciation(20000/5*6/12)
post acquisition period -(2000)What happened then, they did not apply depreciation to this domain name, and i added extra 2000 depreciation over my cost of sale which had not been added because there is no depreciation.Also, they has not given any explanation why depreciation has not been applied
From my point of view, it says that ”it has a negligible cost or it renewable indefinitely at a nominal cost” meaning that indirectly its price can not be determined changes frequently that is why it can not be depreciated in spite of being given remaining useful life.
May 22, 2017 at 8:06 am #387379“however, it is renewable indefinitely at a nominal cost”
That is the key – it has an indefinite life so we don’t have any idea of the period ver which it should be amortised
OK?
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