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Dear Tutor,
Can you please explain the question SunChem in the exam Kit?
The suggested answer states that this is treated as an intangible asset as it fulfils the recognition criteria.However, the question states that Sunchem cannot use the technology to manufacture other compound and that Sunchem has not concluded that economic benefit is likely to flow from the compound.
How does these statement fulfil the IAS 38 recognition criteria?
Thanks in advance
Separate acquisition
When an intangible asset is purchased as a separate item, the accounting treatment
is not controversial. The three requirements for recognition are always met. There is
a separate and identifiable asset, and a recognisable purchase cost. There has been a
transaction to acquire the intangible and so clearly it is expected that the transaction
will generate future economic benefits.
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