Materiality concept — OpenTuition Forums

FFatima3y ago

I found this question in relation to accounting concepts. Question _________ One of Gee plc's employees developed a new product. This has just been patented. The development costs of this product were negligible, but the parent rights are almost certainly worth many millions of pounds. Which accounting concept would prevent the company from recognizing the value of this patent as a fixed asset in its SOFP? ANSWER Materiality concept Why is this the answer? And why are they net mentioning it is an intangible asset?

John MoffatTutor3y ago#1

I don't know where you found this question but these days we don't use the term 'fixed asset (we call them 'non-current assets'). Non-current assets are shown at cost, but since the costs were negligible they are not material.