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On 1 May 2018, Eire bid $100m for a license to use the radio spectrum for the next
generation of mobile phone services. These services will be offered to
customers from 2020.
Some investment analysts have argued in the press that Eire may have over-paid for
this license. Market research has shown that most customers are extremely satisfied
with current network speeds. It is therefore widely believed t h a t t h i s ‘next
generation’ of mobile phone services will not gain mainstream popularity until
2021 at the earliest. Under the terms of purchase, Eire is prohibited from
selling the license to other mobile phone operators.how it will be accounted or what all adjustments needed for the yr end april 2020
Hello. I’m not here to just answer a full question for you. You need to answer it first yourself and then ask when you are struggling with a particular part. It is better for your learning that way.
Looking forward to hearing where you are struggling with the question so that I can help.
Thanks
sir in the que i think only to do is just put the cost correspond to licence under nca also could i know as license for indefinite period so we can think of impairment review even though there is no any amount at the yr end but whether we can assume and suggest due to following sentence in the question
“It is therefore widely believed that his next generation’ of mobile phone services will not gain mainstream popularity until 2021 at the earliest.”Hi,
If they are holding the licence as a non-current asset (intangible) then there is an impairment indicator and therefore an impairment review needs to be carried out. The fair value is nil as the licence cannot be sold so the recoverable amount will therefore be the value in use.
We’re not given the value in use but it would be calculated by discounting the future cash flows from using the licence to present value.
Thanks
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