Intangible Assets Practice Question

Kitchenware Bhd sells kitchen utencils by sending emails to prospective customers. It has recently acquired a customer list from another company that also markets its products in a similar fashion for RM3,000,000. The directors of Kitchenware Bhd estimate that it will generate sales from the list for a minimum of 2 years, and a maximum of 3 years. The directors intend to build on the customer list by sending a questionnaire through emails to prospective customers. The directors are of the view that the answers from the questionnaire would help the company add new customers to the customer list, and this should extend the useful life of the list for another year.

Required:

Discuss how Kitchenware Bhd should account for its existing customer list, and the new customer list that was acquired at a cost of RM3,000,000, in accordance with IAS 38 / MFRS 138 Intangible Assets.

If the cost is capitalised, discuss the determination of the useful life over which the asset will be amortised. Justify your answer with reference to the requirements and guidance of IAS 38 / MFRS 138 Intangible Assets.