ACCA FR · Guided practice (Show me how)
Chapter 6: Intangible assets (IAS 38)
Intangibles: research, development, purchased assets and amortisation
Intangibles. Barnaby is involved in developing new products and has spent $15 million on acquiring a patent to aid in this development. The initial investigative phase of the project cost an additional $6 million, whereby it was determined that the future feasibility of the product was guaranteed. Subsequent expenditure incurred on the product was $8 million, of which $5 million was spent on the functioning prototype and the remainder on getting the product into a safe and saleable condition. A further $1 million was spent on marketing and $0.5 million on training sales staff on how to demonstrate the use of the product. At the reporting date the product had not yet been completed.
Intangibles. Sudley bought a new brand name on 1 July 20X0 for $20m. The estimated useful life of the brand name was ten years. A brand specialist valued the brand at a fair value of $22m on 1 July 20X2; there is no active market for brands of this kind. A training course was also run by Sudley on 1 July 20X2 for all staff to train them on how to use a new accounting software. This training cost Sudley $500,000. Sudley expects the employees to remain with them for on average a period of four years. Sudley's year end is 30 June.
Work in $000 (for example, $15 million is 15,000).
Example 2: what Barnaby may capitalise
Calculate Barnaby's intangible assets and expenses at the reporting date.
Example 4: Sudley's expense for the year
Calculate Sudley's brand amortisation and total expense for the year ended 30 June 20X3.
Opening this exercise…