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Hi Mike
In the solutions it states that registration fees are arised from a contractual rights, what does this mean? and I thought a registration fee is seperate? even though it was not acquired separately as it acquired the business at the same time.
Rashings purchase 25% of santash, he does not have control of prices nor selling the tickets, in the solutions it states that rashings does not meet the criteria of IFRS 9 because rashings receives regular c/f and are not capital and interest payments.
I thought this could be argued as the purchase of 25% of santash could be repaid, i.e rashings got a loan to purchase this 25%, i.e purchase price may be paid over a no of years. Or am I completely wrong.
Thank you
Hi Karen
“In the solutions it states that registration fees are arised from a contractual rights, what does this mean? and I thought a registration fee is seperate? even though it was not acquired separately as it acquired the business at the same time.”
Here’s a quote from IAS Plus about IAS 38:
“IAS 38 Intangible Assets outlines the accounting requirements for intangible assets, which are non-monetary assets which are without physical substance and identifiable (either being separable or arising from contractual or other legal rights). Intangible assets meeting the relevant recognition criteria are initially measured at cost, subsequently measured at cost or using the revaluation model, and amortised on a systematic basis over their useful lives (unless the asset has an indefinite useful life, in which case it is not amortised).”
I believe that answers the first part of your post (arising from contractual rights simply means that the right to registration fees has arisen as a result of a contract entered into)
” in the solutions it states that rashings does not meet the criteria of IFRS 9 because rashings receives regular c/f and are not capital and interest payments.”
No, the solution does not say that! Here it is:
“In this instance Rashing should recognise a financial asset in accordance with IFRS 9. The asset would be classed as either amortised cost or fair value depending on Rashing’s model for managing the financial asset and the contractual cash flow characteristics of the financial asset. A financial instrument would be classed as amortised cost if both of the following conditions are met:
(a) The asset is held within a business model whose objective is to hold assets to collect contractual cash flows.
(b) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Rashing does not meet this criteria because although Rashing receives regular cash flows, these are not solely payments of interest and capital and are based on ticket revenues and therefore match attendance. As such, the fair value model is more appropriate.”
The emphasis is in the last paragraph – “Rashing does not meet the criteria (for classifying as amortised cost) and, as such, the fair value model is more appropriate.”
OK?
As the solutions states:
Rashing does not meet this criteria because although Rashing receives regular cash flows, these are not solely payments of interest and capital and are based on ticket revenues and therefore match attendance. As such, the fair value model is more appropriate.”
in this para ” not solely payments of interest and capital” can you give examples, that are payments of interest and capital? can a form of lease be one?
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