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1. i notice that sometimes question refer as analytical procedure or analytical review. May i know what is the difference between these two terminologies ?
2. in the question Connolly (question number 1) December 2014, in part (c), it says that useful life of brand of 15 years will need to be discussed and understand how they get the 15 years.
My question is when Connolly Co buys the brand “Cold Comforts”, isn’t useful life shown in the contract ? like the brand cost shown in the contract ?
From my understanding, useful life and purchase amount would be shown in the legal document and therefore upon acquisition, Connolly would depreciate the useful life as per shown in the contract.
or is it depends on the circumstances ? if the useful life is not shown, then the Connolly would estimate the useful life ?
3. .usually in the audit procedure, for example when A acquires B, and i would to obtain register of shareholder, then where would i be able to obtain ? (like stock market listing, we can find it over the website in internet ? )
1. Analytical review is an old term now (still mostly used only with reference to a review engagement). Analytical procedures is the current and preferred term for assurance engagements (specifically “substantive analytical procedures” when talking about their use in obtaining audit evidence as opposed the use of analytical procedures in the risk assessment and completion/final review stages). There is no distinction in terms of what they involve.
2. A contract with a “right to use” a trademark, for example, would include a period of validity. However, if you sell (outright) a brand name it’s not like selling a car with a manufacturer’s warranty of 5 years (so you might expect it to have a useful life of five years). Even if the contract included a useful life (I think unlikely), it could only be the seller’s estimate. A brand name has to be maintained and it’s useful life depends on many factors – the product it represents may become obsolete (e.g. “Polaroid”, “Linoleum”, “Formica”) – the emergence of a new (competing) brand may impair a brand name – perhaps you decide not to compete on name and let your brand die a natural death over a few years – and so on. Management should have plans for the brand name (otherwise why did it buy it?) to justify the estimate of useful life.
(“Cadbury” is an interesting example – you think “chocolate”? Do you know who actually owns it? (It was sold in 2010.) The owner (now Mondelez) does not amortise the Cadbury brand name but assesses it annually for impairment (IAS 38).)
3. A register of shareholders is a statutory register in most jurisdictions (ie required to be kept by law). In the UK, for example, companies must file an “annual return” to Companies House (an agency for the government) which is responsible for making information about companies available to the public. (This is assumed knowledge of company law (F4).)
2. therefore what you mean is that, generally useful life is stated but with the reasons & justifications of the useful life for that particular brand.
Is it correct ?
The Q will usually say something – e.g. “recognised at cost … not amortised” – means the useful life is regarded as indefinite. Whether stated or implied you would need to consider, for example, the audit evidence that would support management’s assertion of useful (which obviously has a bearing on valuation).
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