Question

In 2013, Aquaculture Incorporated applied for several commercial fishing licences for its commercial fishing vessels. The application was successful and on January 2, 2014, Aquaculture was granted 22 commercial fishing licences for a registration fee of $18,700 per licence. According to management, each licence had a useful life of eight years from the date of registration. After the eight years, funher cash flows might still be possible, but they are uncertain. There is an active market for Aquaculture's licences, which are freely transferable.
In 2015, due to an oil spill in the bordering ocean and severe commercial fishing restrictions, the value of Aquaculture's licences decreased. As of December 31, 2015, each licence had value in use of $9,500, fair value of $8,300,
and costs to sell of $200. In 2017, due to much higher demand and restricted issuance of commercial fishing licences, the value of Aquaculture's licences increased. As of December 31, 2017, each licence had value in use of $14,900, fair value of $17,000, and costs to sell of $200. Aquaculture amortizes intangible assets using the straight-line method, revalues the licences at the end of 2015 and 2017, and prepares financial statements in accordance with IFRS.
Instructions
(a) Prepare the entry to record the costs incurred on January 2, 2014.
(b) Assume that after initial recognition, Aquaculture uses the revaluation model (asset adjustment method) to measure its intangible assets. Prepare the entries required on December 31, 2015, December 31, 2016, and December 31, 2017, and calculate the carrying amount of the intangible asset, if any, as at December 31, 2017.
(c) Assume that after initial recognition, Aquaculture uses the revaluation model (proportionate method) to measure its intangible assets. Prepare the entries required on December 31, 2015, December 31, 2016, and December 31, 2017, and calculate the carrying amount of the intangible asset, if any, as at December 31, 2017.
(d) Would an investor prefer Aquaculture to use the asset adjustment method or the proportionate method to apply the revaluation model?


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  • CreatedSeptember 18, 2015
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