Fiji National University

College of Business, Hospitality and Tourism Studies

School of Accounting & Law
Department of Accounting

ACC702 International Corporate Reporting

Semester 1, 2021

Alternative Assessment: Case Study 1-15%

Instructions:

1. Individual Assignment
2. No Plagiarism
3. Assignment can be submitted via Dropbox or emailed to your respective Lecturer,
whichever is convenient.
4. Due date: 13th June 2021, 11.59 pm via Moodle Dropbox.

Question 1: Intangible Asset [ 3 Marks]

Brilliant Ltd acquires copyrights to the original recordings of a famous singer. The agreement with
the singer allows the company to record and re-record the singer for five years. During the initial
six month period of the agreement, the singer is very sick and consequently cannot record. The
studio time that the company blocked had to be paid even during the period the singer could not
sing.
The following are the costs were incurred by the company:
A. Legal cost of acquiring the copyrights - $11million
B. Operational loss (studio time lost, etc.) during start-up period - $3 million
C. Massive advertising campaign to launch the artist -$2 million

Required:
Discuss which of the above cost from (A-C) is eligible to be recognized as an intangible asset using
IAS 38?
Question 2: Business combination [ 5 Marks]

On 1st December 2020, Grapefruit Ltd acquired the following assets and liabilities of Lime Ltd.

Carrying Amount Fair Value

Cash 20,000 20,000
Receivables 40,000 38,000
Inventory 27,000 42,000
Property, Plant and Equipment 135,000 157,000
Accounts Payable (37,000) (39,000)
Loan (41,000) (46,000)
In exchange for these assets and liabilities, Grapefruit Ltd issued 100,000 shares that have been
issued for $1.20 per shares but at 1st December 2020, had a fair value of $6.50 per share.

Required:

I. Prepare the acquisition analysis using IFRS 3

II. Prepare the journal entries in the records of the Grapefruit Ltd account to acquire the
assets and liabilities of Lime Ltd.
III. Prepare the acquisition analysis assuming that the fair value of the shares was $8.30
per share

Question 3: Impairment Assets [7 Marks]

Max Ltd acquired all the assets and liabilities of Topaz Ltd on 1st January 2020. Topaz Ltd's
activities were run through three separate businesses: Amethyst Unit, the Sapphire Unit, and the
Emerald Unit. These units are separate cash-generating units. Max Ltd allowed unit managers to
operate each unit effectively, while some central activities were run through the cooperate
office. Each unit was allocated a share of the goodwill acquired and a share of the corporate
office. On 31st December 2020, the assets allocated to each unit were as follows:

Amethyst ($) Sapphire ( $) Emerald ( $)

Factory 920 750 480
Accumulated (420) (380) (340)
depreciation
Land *200 **300 *150
Plant 350 410 650
Accumulated (80) (320) (340)
depreciation
 Inventory 220 82 *105
Goodwill 40 50 30
Corporate property 210 160 120
Additional Information:

*these assets have carrying amount less than fair value less costs to sell.

**this asset has a fair value less costs to sell of $293.

Max Ltd determined the value in use of each of the business units on 31st December 2020.

Amethyst $ 1185

Sapphire $950

Emerald $900

Required:

Using IAS 36: Determine how Max Ltd should allocate any impairment loss on 31st December
2020.

THE END.