- This topic has 3 replies, 2 voices, and was last updated 3 years ago by
.
- Posts
maam I don’t understand why in this question don’t we take 65/10=6.5m as the amortisation charge for 31dec20X6 yr ended? technically amortisation begins when the asset is aviable for use(even if it is idle) so then even if the network became operational 1.5 yrs later, how does it matter? I find it absurd to do 65/8.5!
An intangible asset that is not in use is not amortised but tested for impairment. Since the purpose of depreciation/amortisation is to “match” capital expense with revenue, it would be absurd to charge depreciation/amortisation to a period in which no matching revenue has been generated.
“On 1 January 2015, ZCG purchased a licence to operate in Farland, a rapidly expanding economy, at a cost of $65 million. The licence lasts for 10 years FROM THE DATE that it was purchased. Since purchasing the licence, ZCG has established its network coverage in Farland and the network became operational on 1 July 2016. …”
Presumably there was no impairment as at 31 December 2015 when the licence still had 9 years to run (otherwise the Q would have to tell you how much that was). And by the time the network becomes operational the licence has only 8.5 years to run.
Perhaps when you find things “absurd” it is worth re-reading the scenario to see if you are missing something.
- The topic ‘ZED COMMUNICATIONS Grp S16/D16 (A) Kaplan kit- amortisation of license’ is closed to new replies.