Beautify Limited, an established and well$-$known brand, selling make up and facial products,

acquired Roland Limited, another popular brand well known in the industry. Roland Limited was

acquired for R$35000000$ which was paid in full on the $1$st of January $2020,$ the date of acquisition.

Legal fees of R$550000$ were spent in acquiring this brand. The legal fees were paid on the $31$st of

March $2020.$ The Roland stores were closed to allow for staff training on the brand which amounted

to R$1650000.$ Training took place in March and April $2020$ to allow for trading from the $1$st of June

$2020.$ Sales of this brand commenced from the $1$ June $2020.$

Beautify Limiteds head accountant, Gorgeous, went on maternity leave therefore the deputy

accountant has been holding the fort. The deputy accountant, Sally, received an email from the CEO

of Beautify Limited, requesting information on the purchase of this new brand. The CEO is not an

accountant and is therefore confused with the accounts presented to him. As Sally, is so busy with

the day$-$to$-$day operations, she has requested you to write back to the CEO providing the answers to

his queries.

REQUIRED:

Write a memo to the CEO of Beautify Limited outlining the following:

$4\mathrm{.}1$ What is the definition of an intangible asset? $(3)$

$4\mathrm{.}2$ What is the recognition criteria of an intangible asset? $(2)$

$4\mathrm{.}3$ Discuss with reason whether Roland Limited can be recognized as an Intangible asset with

reference to IAS $38.(12)$

$4\mathrm{.}4$ What is the correct accounting treatment for Roland Limited in the financial statements of

Beautify Limited.

Answer rating: 100% (QA)

Introduction As Beautify Limited expands its business through the acquisition of Roland Limited there arises a need to understand the accounting treatment of intangible assets particularly in relation ... View the full answer