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Consolidation and intangible assets

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Consolidation and intangible assets

  • This topic has 9 replies, 2 voices, and was last updated 8 years ago by MikeLittle.
Viewing 10 posts - 1 through 10 (of 10 total)
  • Author
    Posts
  • September 3, 2016 at 3:19 pm #337315
    anna1305
    Member
    • Topics: 3
    • Replies: 6
    • ☆

    Hi,
    I’m unsure what the criteria for recognising intangible assets separately from goodwill on consolidation would be.
    Would it follow the same criteria as recognising intangibles normally, and how should I judge whether this should be separate from goodwill?
    Many thanks in advance.

    September 3, 2016 at 3:40 pm #337325
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23315
    • ☆☆☆☆☆

    A question will tell you by name the intangible assets

    “The entity also had a brand that was not recognised …”

    “The entity owned a patent …”

    “The entity had royalty receivable ….”

    There’s really no problem about recognising an intangible in the F7 exam … the examiner spells it out for you

    OK?

    September 3, 2016 at 3:47 pm #337329
    anna1305
    Member
    • Topics: 3
    • Replies: 6
    • ☆

    Ok, so in those examples I would recognise separately from goodwill?
    The question I was originally stuck on was question 2 in the specimen paper, and it wasn’t immediately obvious to me why the answer was the research project.
    Thank you.

    September 3, 2016 at 4:44 pm #337338
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23315
    • ☆☆☆☆☆

    Research too is normally separately identifiable …

    … but of course research s not an intangible asset!

    Only development can be capitalised and then only if that development expenditure satisfies strict criteria

    September 3, 2016 at 5:09 pm #337343
    anna1305
    Member
    • Topics: 3
    • Replies: 6
    • ☆

    Ah, so because it is not an intangible asset, that is why it can be recognised separately in goodwill?
    I think I need to get my head around the wording of the question and possible answers as that’s not how I read the question initially!
    Thank you for your help.

    September 3, 2016 at 5:48 pm #337360
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23315
    • ☆☆☆☆☆

    I would need to know the precise question before I could comment any further!

    September 3, 2016 at 6:19 pm #337370
    anna1305
    Member
    • Topics: 3
    • Replies: 6
    • ☆

    Ok, it was question 2 from the specimen exam paper:

    When a parent is evaluating the assets of a potential subsidiary, certain intangible assets can be recognised separately from goodwill, even though they have not been recognised in the subsidiary’s own statement of financial position.

    Which of the following is an example of an intangible asset of the subsidiary which may be recognised separately from goodwill when preparing consolidated financial statements?

    A A new research project which the subsidiary has correctly expensed to profit or loss but the directors of the parent have reliably assessed to have a substantial fair value

    B A global advertising campaign which was concluded in the previous financial year and from which benefits are expected to flow in the future

    C A contingent asset of the subsidiary from which the parent believes a flow of future economic benefits is possible

    D A customer list which the directors are unable to value reliably

    And they have given the answer as A.

    September 3, 2016 at 6:34 pm #337372
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23315
    • ☆☆☆☆☆

    D – unreliable value

    C – only possible benefits

    B – completed last year and written off with only an expectation of a future flow of benefits

    A – reliable assessment of substantial fair value so a valuable asset (even though correctly written off in previous years)

    It has to be A

    September 3, 2016 at 7:38 pm #337381
    anna1305
    Member
    • Topics: 3
    • Replies: 6
    • ☆

    Ok, that makes sense.
    Thanks for your help.

    September 3, 2016 at 7:40 pm #337382
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23315
    • ☆☆☆☆☆

    You’re welcome

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