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ACCA FR Chapter 6 Intangible assets (IAS 38) Questions

VIVA Subject Guide

16 Comments

  1. HK
    Hi, Can someone please explain why in Q2 June and July were capitalised as the product was still in development? Shouldn't they be expensed, the product was not ready for use?
  2. sukhnoor
    because it is stated that directors were confident :
    and as our standard says that one can only capitalize when PIRATE is being followed so hence it will be capitalized.
  3. M.shruthika
    in practice question 1 why should we consider Amortisation for 1 year
  4. Widaad
    hiii
    concerning question 3 can you explain how did we get the $25m and the amortisation of $1050000 please?
  5. saintsinner
    40m/10*3= 12m + 40/10*(9/12)= 3m (A+B) 12M +3M =15 being total amortization

    40m-15= 25m.

    cv=25, recoverable amount= higher of value in use and nrv= 21

    current CV=25, IMPAIRMENT = 25-21=4
    NB useful life of the asset was reviewed to 5yrs

    21/5*(3/12)=1050000
    new cv=21000000-1050000=19950000.
  6. Dany Harris
    Amortisation should start when the production begins, so 800 (400*2) should only be capitalised. Why have they amortised it as per 30% if the production hasnt started yet Please help
  7. Hanzlah
    WHERE DOES THI £8M COME FROM IN Q1 TO BE AMORTISED, SHOULD IT NOT BE £800,000*30%=£240,000?
  8. Augusta
    Good Evening |Sir,

    Please kindly explain the breakdown of the solution to this question 3.

    I understand the 3 years and 10 months period but I don't understand how the carrying value of $25,000,000 came about and

    the amortisation of $21,000,000 with a 5 year life = $1,050,000.

    Thanks.
    Augusta.
  9. dilshadmd
    Because the product has not been launched and commercial production not started yet, for $80M there was written that product launched and for the current development expenditure product will be going to launch next year.
  10. rebescosco
    Hello sir,
    Please sir I also have the same issue with this question.

    I will appreciate if you can explain further.

    Thanks for your time.
  11. owolabibusolao
    Hello, Please I was hoping to understand why the development cost of $1,200,000 was expensed and not capitalised . Thank you
  12. rebescosco
    Hello sir,

    I learnt from the video that we should capitalize development cost, so even though it's a prototype we can capitalize as PPE, but it was expensed above sir In question One.

    Please can you explain further.
  13. dilshadmd
    We have several Criteria to capitalize Development Exp, one of the criteria is Commercial Viability, On Feb 1 the feasibility to generate revenue from the project was clear, till then directors were not sure whether it will generate the future economic benefits in terms of revenue or cost reduction.

    whenever it is given that directors confirmed that project will benefit them, that is the time for capitalizing the development exp in SFP.
  14. boianna
    hello sir, why is $800,000 (Feb-Mar 2013) not amortized?
  15. dilshadmd
    Because the product has not been launched and commercial production not started yet
  16. Anna
    Hello, I've a question regarding question 1 in this practice test (intangible assets ch.6). Why development expenditure of $400 per month incurred between 1.11 - 31.1 to build a prototype are being expensed instead of capitalised? Shouldn't the design, construction and testing of prototypes and models be capitalised? Thank you.

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