Mukula meets the classification of Small and Medium Enterprises (SME) and complies with IFRS for SMEs. Mukula
Question:
Mukula meets the classification of Small and Medium Enterprises (SME) and complies with IFRS for SMEs. Mukula has the following transactions for the year ended 30 June 2020.
i) Mukula purchased an investment property at cost of K200,000 on 1 January 2015. The asset was estimated to have an economic useful life of 10 years when purchased.
There has been no change to its estimated useful economic life since it was purchased.
At 1 July 2019, the fair Value of the Investment property was K150,000 and on 30
June 2020, it was K138,000.
ii) Mukula purchased a brand name for its products at a cost of K55,000 on 1 August 2019. The brand name has an estimated economic useful life of 5 years from the date of purchase. Mukula estimated that the fair value of the brand name was K42,000 and K44,000 on 30 June 2019 and 30 June 2020 respectively.
Required:
Discuss how the two transactions would be accounted for:
1. Under IFRS for SMEs (4 marks)
2. Under full IFRS (8 marks)
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett