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Unrecognised assets

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Unrecognised assets

  • This topic has 3 replies, 2 voices, and was last updated 8 years ago by MikeLittle.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • October 8, 2016 at 1:07 pm #342715
    jimbern
    Member
    • Topics: 17
    • Replies: 15
    • ☆

    Dear Sir

    I hope this message finds you well
    I have a (frankly silly) question/situation:

    Can you depreciate/amortise the name of a product if the name is treated as a non-current asset?

    I was looking at a section of f7 dealing with recognition of assets and liabilities and it mentioned that if changing the name of a product caused a significant increase in sales, the name could be classed as an asset.
    But only if the company using the name had bought the name, therefore reliably knowing the value/cost of the name.

    Now let’s say that you have a building (which is your non-current asset and you would depreciate in whatever way you chose) but you want to make it a tourist attraction and thus you change the name of the building to attract a certain type of clientele.
    As such you name the building (after having bought the name) after a certain wizarding institution.
    The re-naming causes a massive increase in revenue over time and it comes time to prepare your financial statements. As such (assuming I have not misunderstoood the section of the study guide), the name could now be classed as an asset.

    Does the fact that you have bought the name, which is linked to a non-current asset, mean that you would be required to depreciate/amortise the value paid for the name ?
    Does the name become a non-current asset in itself ?

    Should such frivolous questioning be relegated to more fanciful forums ?

    regards

    PS sincere apologies if my question is not appropriate for this forum. I truly appreciate all the work you do here.

    October 8, 2016 at 4:22 pm #342730
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23309
    • ☆☆☆☆☆

    This question really is a load of Hogwash! 🙂

    “Does the name become a non-current asset in itself ?”

    Yes, you’ve just bought it! Does it satisfy the definition of an asset (as per the Framework)?

    Yes it does

    So amortise it over its estimated useful life (which is likely to be shorter than the life of the building)

    October 13, 2016 at 9:28 am #342853
    jimbern
    Member
    • Topics: 17
    • Replies: 15
    • ☆

    That’s magic! 😀

    thanks for your help, sir

    All the best

    October 15, 2016 at 8:50 pm #343377
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23309
    • ☆☆☆☆☆

    You’re welcome

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