Dear Tutors,
I have some problems with this question regarding the following note:
(iv) Samson Co's development project was completed on 30 September 20X4 at a cost of $50 million. $10
million of this had been amortised by 31 March 20X5. Development costs capitalised by Samson Co at the
date of acquisition were $18 million. Highveldt Co's directors are of the opinion that Samson Co's
development costs do not meet the criteria in IAS 38 Intangible Assets for recognition as an asset.
In the Kit book, they calculate the Fair value adjustment in the FV of net assets at acquisition in the Goodwill as follows:
Fair value adjustment:
Revaluation of land 20
Recognition of fair value of brands 40
Derecognition of capitalised development expenditure (18)
Total 42
What I am not clear about is that the derecognition happens at the reporting date. Why do we have to include this in the Goodwill calculation at the acquisition date?
I am looking forward to receiving your answers.
Thank you.
Ask the Tutor ACCA FR
296 Highveldt Co page 96 BPP Kit
5y ago#1Hi,
The directors do not believe that the $18 million of costs do not meet the criteria, so this will not just have been the case at the reporting date but it would also apply at the acquisition date too. It states in the question that this is the case.
Thanks
Thank you sir,
That helps me to understand the problem better.
5y ago#3Excellent! Glad to hear it.
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