Intangibles – Tutorial questions

Question 1

Explain the following:

a) The meaning of the term ‘intangible asset’ and those intangible assets that are
within the scope of IAS 38;

b) The criteria that need to be satisfied before expenditure can be recognised as

an intangible asset under IAS 38;

c) Explain why internally generated brands, publishing titles, customer lists and
items similar in substance shall not be recognised as intangible assets.

Question 2

Discuss whether the following items can be recognised as intangible assets in

reference to the IAS 38 recognition criteria.

a) An exclusive licence purchased by Crompton Acres Limited for RM50,000 allowing

them to manufacture a specific design of boat in the UK for the next ten years.

b) Project E commenced at the start of the year. It was confirmed at the start of
November that it also anticipated to be successful and sufficient resources will be
made available to complete the project. Total costs incurred during 20X8 were
RM250,000, of which RM78,000 was incurred after 1 November.

c) NewsRoom Publishing has developed several titles over the last decade. The most
recent of these was a daily paper called ‘Headlines today’. The costs associated with
developing this title were RM340,000.
Question 3

Over the last two years Gerbera plc's research and development department had been
investigating a new, environmentally friendly pesticide, spending a total of RM1.2 million,
which has been recognised as an expense. At the end of September 20X6, a formula for the
pesticide was finally developed. Market research is extremely favourable and the pesticide
looks set to be very profitable. During the first half of the year ended 30 September 20X7,
the following costs were incurred on the project:

RM'00
0
Machine purchased on 1 October 20X6 to be used in pre-
production and production of the pesticide (estimated useful life
five years) 500
Materials, labour and consumables 280
Product launch costs 60
Legal fees 30
870

Sales of the pesticide commenced on 1 April 20X7 and are expected to continue for a total
of three years before a competitor develops a superior product.

Required:

Explain the accounting treatment of the pesticide in Gerbera’s financial statements for
the year ended 30 September 20X7.

Question 4

Can professional football players be capitalised on their team’s financial statements as

intangible assets?

Be ready to debate in your tutorial group!