7. On 2 January 2019, the company obtained for free from the Malaysian government a license that allows the company to export goods to overseas for an indefinite period. On that date, the fair value of the permit was RM1,000,000. Since it is free, no record was made to account the license. The company adopts a revaluation model to measure the intangible assets.

8. In March 2017, the company enter into a contract with a chicken supplier - Ayam Organik Sdn Bhd to ensure the supply of chicken is not interrupted. However, in May 2019, Ayam Organik Sdn Bhd was sued by the authority due to the farm hygiene issues. As a result, Ayam Organik Sdn Bhd has received negative publicity from the public which also affects Laguna Bhd indirectly. Due to that, the company decided to terminate the contract with Ayam Organik Sdn Bhd on 1 June 2019. On that date, the contract had remaining 9 months.
Based on the agreement, Laguna Bhd must place a minimum monthly order of RM25,000 and in the event of the agreement being terminated earlier than its terms, the supplier is entitled for a compensation of RM150,000 for the contract that still has 6 to 9 months remaining terms. As at 30 June 2019, no record has been made for this transaction.

i. Refer to additional information (7), based on relevant accounting standard, discuss the choice of accounting policy for intangible assets i.e. MFRS 138 and MFRS 120. Also, explain the appropriate accounting treatment if the license is only for a period of ten years.

ii. Refer to additional information (8), based on relevant accounting standards i.e. MFRS 137, explain the appropriate accounting treatments for the transaction.

Answer rating: 100% (QA)

7 As specified by the standard with respect to intangible assets it can be recorded e... View the full answer