IAS38 Intangible Assets identifies the criteria that need to be present before expenditure on intangible items...

 

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IAS38 Intangible Assets identifies the criteria that need to be present before expenditure on intangible items can be recognised as an asset. The standard also prescribes the subsequent accounting treatment of intangible assets that satisfy the recognition criteria and are recognised in the statement of financial position. Required: a) Explain the criteria that need to be satisfied before expenditure on intangible assets can be recognised in the SFP as intangible assets. [5 marks] b) Explain how the criteria outlined in (a) are applied to the recognition of separately purchased intangible assets, intangible assets acquired in a business combination and internally generated intangible assets. [7 marks] c) Explain the subsequent accounting treatment of intangible assets that satisfy the recognition criteria of IAS38. [4 marks] d) Gamma prepares financial statements to 31 December each year. On 1 January X9 Gamma began a project to make its production more efficient. Costs of £6 million (£500,000 per month) were incurred in the year to 31 December X9 and debited to the statement of comprehensive income. On 1 July X9 the results of the project were very encouraging and the directors were able to demonstrate the project would generate substantial economic benefits for Gamma from 30 June X9 onward as its technical feasibility and commercial viability were clearly evident. e) Explain how the transaction should be recorded in the financial statements of Gamma for year ending 31 December X9 and quantify the amounts recognised. [4 marks] IAS38 Intangible Assets identifies the criteria that need to be present before expenditure on intangible items can be recognised as an asset. The standard also prescribes the subsequent accounting treatment of intangible assets that satisfy the recognition criteria and are recognised in the statement of financial position. Required: a) Explain the criteria that need to be satisfied before expenditure on intangible assets can be recognised in the SFP as intangible assets. [5 marks] b) Explain how the criteria outlined in (a) are applied to the recognition of separately purchased intangible assets, intangible assets acquired in a business combination and internally generated intangible assets. [7 marks] c) Explain the subsequent accounting treatment of intangible assets that satisfy the recognition criteria of IAS38. [4 marks] d) Gamma prepares financial statements to 31 December each year. On 1 January X9 Gamma began a project to make its production more efficient. Costs of £6 million (£500,000 per month) were incurred in the year to 31 December X9 and debited to the statement of comprehensive income. On 1 July X9 the results of the project were very encouraging and the directors were able to demonstrate the project would generate substantial economic benefits for Gamma from 30 June X9 onward as its technical feasibility and commercial viability were clearly evident. e) Explain how the transaction should be recorded in the financial statements of Gamma for year ending 31 December X9 and quantify the amounts recognised. [4 marks]

Answer rating: 100% (QA)

a The criteria that need to be satisfied before expenditure on intangible assets can be recognized in the S FP as intangible assets are 1 The expenditure must be for the acquisition or development of ... View the full answer