MadSurf Magazine is an Australian based business who distribute their magazine across the nation. The profits of the company are growing steadily and management and investors are seeing great results overall. The belief is that the company’s success is due to its marketing flair and expertise. The company offer free delivery, although their magazine subscriptions are a little higher in price compared to other surf related magazines.

The company is growing its customer list by advertising on social media platforms, and has even started to target prospective customers directly via emails and phone calls. The 30 June 2022 costs of delivery, advertising, mailings and phone calls is significant at $65,000 and MadSurf would like to capitalize these costs as an intangible asset, specifically as a customer list. For the year-end 30 June 2022, MadSurf also obtained an independent value of $80,000 for this customer list. Additionally, on 1 October 2021, MadSurf purchased a customer list from a competitor for $100,000, estimating that it would generate sales for another 3 years. After the purchase, MadSurf started conducting the phone calls (as noted above) and believes that alternatively the costs of these phone calls could be added to the purchased customer list. The extra names of customers obtained in the phone calls are expected to increase the useful life of this customer list by another year.

Required 1. Using AASB138 Intangible Assets, explain how MadSurf should account for the costs of: Delivery, advertising, mailings and phone calls totaling $65,000. 

According to AASB138 Intangible Assets, explain whether MadSurf can: Use a fair value to initially measure a customer list Capitalize the costs of phone calls to the purchased customer list

Answer rating: 100% (QA)

Question Using AASB138 Intangible Assets explain how MadSurf should account for the costs of Delivery advertising mailings and phone calls totaling 65000 Answer Recognition criteria for Intangible Ass... View the full answer