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Bassett group M/J’18 kaplan kit- part a) i and ii) Transfer of software

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Bassett group M/J’18 kaplan kit- part a) i and ii) Transfer of software

  • This topic has 4 replies, 2 voices, and was last updated 1 year ago by Kim Smith.
Viewing 5 posts - 1 through 5 (of 5 total)
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  • September 27, 2021 at 3:03 am #636543
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    The transfer of software gives rise to several audit risks.
    First, there is a risk that the software was overvalued when it was transferred from Bassett Co to Borzoi Co. The fair value which was recognised in the parent company accounts immediately prior to the transfer of the asset was determined by Group management, and while revaluation is permitted by IAS 38 where an active market for the asset exists, this fair value could be inappropriate. In the absence of an active market, it is unlikely the revaluation should have been recognised at all.

    ma’am nowhere in the question it is given that active market doesn’t exist for Bassett’s software. so then are they assuming?

    Or the fact that the terminology in the question is “estimate of fair value was determined by Group management” —this is an indication that active market doesn’t exist?

    September 27, 2021 at 7:41 am #636549
    Kim Smith
    Keymaster
    • Topics: 100
    • Replies: 6794
    • ☆☆☆☆☆

    Q: “£5 million relates to purchased software [there would be an active market], and £10 million relates to internally developed software [there is NO active market for anything that is unique/one of a kind]”

    September 27, 2021 at 8:53 am #636567
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    ohhh my bad! thank you ma’am for bringing it to my notice!

    September 27, 2021 at 10:27 am #636578
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    waittttt ma’am!

    is it true that if capitalisation criteria for internally generated assets like software, are met then they those assets will be capitalised?

    so only exception would be internally generated goodwill and brands, which will never be capitalised even if they meet capitalisation criteria?

    September 27, 2021 at 10:52 am #636582
    Kim Smith
    Keymaster
    • Topics: 100
    • Replies: 6794
    • ☆☆☆☆☆

    Such internally-generated “assets” cannot be capitalised in the entity’s financial statements – BUT if the entity is purchased, any internally-generated intangible other than goodwill SHOULD be capitalised – you should know – you’ve studied SBR – assets (and contingent liabilities) are recognised in a business combination so that the amount calculated as purchased goodwill (goodwill in the consolidated financial statements) is as small as possible.

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