Professional Documents
Culture Documents
1. Intangible assets that are amortised are no longer subjected to impairment testing.
True False
True False
3. Internally generated brands, mastheads, publishing titles and customer lists are permitted to be
recognised as intangible assets.
True False
4. AASB 138 permits the use of revaluation model for intangible assets if there is an active market
to determine fair value.
True False
5. The revaluation model requires all intangible assets in the same class to have a fair value
determined by reference to an active market.
True False
6. If the fair value of a revalued intangible asset can no longer be determined by reference to an
active market, AASB 136 requires the use of the cost model.
True False
7. Internally generated identifiable intangible assets may be recognised for financial accounting
purposes in Australia.
True False
True False
9. There are only rare occasions when an identifiable intangible asset should be amortised.
True False
10. International convergence has meant that there is no longer one specific standard related to
intangibles
True False
11. Development costs are less likely to meet the test for deferral than research costs.
True False
12. Compared to the requirement in the US, the treatment of research and development costs in
Australia is less conservative (that is, likely to result in higher profits).
True False
13. AASB 138 requires that all intangibles, whether purchased or internally generated, be
capitalised.
True False
True False
15. Intangible assets without a limited useful life cannot be recorded under AASB 138 as they cannot
be amortised.
True False
16. According to AASB 138 on intangible assets, if an entity buys another entity separate values can
be assigned to purchased goodwill and to a brand name.
True False
17. Expenditure on an intangible asset that was initially expensed may be recognised as part of an
intangible asset at a later date.
True False
18. AASB 138 prohibits the recognition of intangible assets using the revaluation model.
True False
19. The cost of a separately acquired intangible asset includes its purchase price and directly
attributable cost for preparing the asset for its intended use.
True False
20. Where a revaluation occurs, it is to be to the fair value of the asset.
True False
A. loyal customers.
B. patents and trademarks.
C. provisions.
D. loyal customers, patents and trademarks.
A. They are not subject to the recognition criteria of other assets and may be recorded if they
satisfy the three elements of the definition.
B. They must be expensed immediately, as assets must be able to be measured.
C. They have no real value and should be excluded from accounting reports.
D. None of the given answers are correct.
A. It should be recognised when (a) it is definite that future economic benefits will eventuate or (b)
the asset possesses a cost or other value that can be measured reliably.
B. It should be recognised if (a) the expenditure is with an external party in an arm's length
transaction for a separately identifiable intangible asset or (b) the intangible asset arises as the
difference between the net tangible assets of an entity and the price paid for that entity.
C. It should be recognised if (a) it is part of a specified plan by management to develop and
maintain a separately identifiable asset or (b) the intangible asset was purchased in an arm's
length transaction and is actively traded in a market.
D. It should be recognised when and only when (a) it is probable that future economic benefits
will eventuate and (b) the asset possesses a cost or other value that can be measured reliably.
A. may not be revalued and must be amortised over their useful lives.
B. are only able to be revalued if they have been internally generated and there is an active
market for them.
C. may only be revalued to their fair value as assessed by a licensed valuer.
D. may be measured by using either the cost model or the revaluation model.
A. the activities undertaken with specific commercial objectives, including original research, to
develop plans or designs for new products or significant improvements to existing products.
B. the application of research findings or other knowledge to a plan or design for the production of
new or substantially improved material, devices, processes, systems or services prior to the
commencement of commercial production or use.
C. the activities undertaken to translate research findings into feasible projects for subsequent
development for commercial objectives such that the recoverable amount is expected to be
greater than the cost.
D. the activities undertaken with the expectation by management that future economic benefits in
the form of new products or improvements to existing products are likely to result, based on
research completed to date.
29. What is the test for deferral of research costs as required by AASB 138?
A. Research costs can be deferred (recorded as an asset) when it is probable that the project
they are applied to will bring future economic benefits.
B. Research costs may not be deferred unless it is almost certain that the project they are applied
to will bring future economic benefits.
C. Research costs may not be recorded as an intangible asset.
D. Research costs may be deferred if the entity can demonstrate that an intangible asset exists
and that it will generate future economic benefits.
30. Which of the following statements is correct with respect to research and development
expenditures in accordance with AASB 138?
A. Activities aimed at obtaining knowledge that is likely to produce a viable commercial product
can be capitalised.
B. Formulation, design, evaluation and final selection of alternative materials to be used in
producing a viable commercial product can be capitalised.
C. Design, construction and operation of a pilot plant that is not of a scale economically feasible
for commercial production can be capitalised.
D. Search for, evaluation and final selection of, applications of research findings and other
knowledge can be capitalised.
31. The requirement of AASB 138 in relation to the amortisation of development cost is that:
The window is expected to earn revenues of $70 000 per year for the 10 years commencing 1
July 2011. Assuming straight-line amortisation, how much of the research and development cost
should be expensed this period and what amount should be amortised in the year ended 30 June
2014?
33. Walking on Air is developing a new form of individual transport that will act like a personal
hovercraft. Costs for the year ended 30 June 2012 are:
Due to the high individual cost of items, sales of this 'prototype' model will be small and generate
$100 000 per year over the next 4 years. Following that time, a new and cheaper consumer
model will be under production based on the research developed for the prototype; however, it
will require additional development expenditure. How much of the research and development cost
should be expensed in the period ended 30 June 2012 and what amount should be amortised in
the year ended 30 June 2006 (rounded to the nearest dollar)?
34. There is a concern that research and development may be reduced as a result of the new
requirements in AASB 138 because:
A. Companies will not have the cash available to pay for the research expenses up-front.
B. Recognising expenses early will allow for larger profits later, which will help smaller firms.
C. The 'horizon problem' suggests managers will not invest in long-term projects that do not
immediately increase profits.
D. Shareholders are only interested in short-term profits and will not be impressed by strategies
that attempt to increase the long-term value of their shares.
35. Castle Co Ltd is working on three research projects. Project Jonah is government-sponsored
research on synthesising currently available research results on the possible triggers of asthma
attacks. Project Beta involves researching the genetic tags associated with heart disease based
on the genome project. A test to identify the predisposition to heart disease in children has been
developed and will be on the market in 2013. Since 2011 research and development expenditures
on this project are applied development costs only. Project Sigma is cutting edge research being
conducted to try and discover a means of 'disassembling' molecules and then 'reassembling'
them in their original form. The company hopes that this work will lay the basis for future dreams
of teleportation as a method of transport. Details of expenditures and recoverable amounts
expected beyond a reasonable doubt at this time are:
What is the total research and development deferral for each project as at the end of the year
2012?
What is the research and development deferral for each project in 2013?
37. AASB 138 describes the distinction between the treatment of internally generated goodwill and
purchased goodwill (as well as other intangibles) as arising because:
A. The two different sources of goodwill result in two different types of asset.
B. Internally generated goodwill is developed in order to be sold, so its value will be recognised at
that time.
C. Internally generated goodwill cannot be reliably measured.
D. Recording purchased goodwill could lead to the manipulation of profit and asset amounts.
38. The treatment of internally generated goodwill varies from purchased goodwill under AASB 138 in
that:
A. the excess of the cost of acquisition incurred by an acquirer over the fair value of the
identifiable net assets acquired.
B. the difference between the cost of acquisition of a subsidiary and the realisable value of net
assets of the subsidiary.
C. the lower of the sum of related expenditures on advertising and promotion undertaken in the
last 2 years by the subsidiary being purchased and the independent valuation of the market
value of that subsidiary's goodwill.
D. the excess of the cost of acquisition incurred by an acquirer over the fair value of the
identifiable net assets and contingent liabilities acquired.
40. Far-flung Co Ltd purchases Local Co Ltd for the purchase consideration of:
Far-flung incurred legal fees of $6000 to complete the acquisition. Local Co Ltd had the following
assets and liabilities at the time of the purchase
A. $0
B. $80 000
C. $141 000
D. $86 000
41. Earth Ltd acquired Moon Ltd on 1 July 2009 for the sum of $100 000. On the same date Moon Ltd
has the following assets and liabilities:
43. The release of AASB 138 has had what impact on the methods of amortising goodwill?
A. The choice to use the inverted sum-of-digits method was phased out over a period of 15 years,
to be replaced by straight-line depreciation.
B. The option to amortise goodwill was removed and replaced with annual impairment testing.
C. Entities were given the option of continuing to amortise goodwill or to subject it to impairment
testing each year.
D. All entities were required to amortise goodwill over 20 years using the straight-line method to
allow comparisons.
44. AASB 138 contains some elements that seem to be reactions to opportunistic behaviour by
preparers of accounts and to the degree of uncertainty surrounding goodwill as an unidentifiable
intangible asset. These elements include:
A. The research that has shown accounting figures to be used in a mechanistic way suggests that
Australian firms will be disadvantaged relative to international competitors in the takeovers
market.
B. Sophisticated users will be aware that there are no direct cash-flow effects of the different
amortisation treatments for goodwill. The effect of differential taxation treatments (since the
ATO does not permit a deduction for the amortisation of goodwill) will, however, have a
negative impact on Australian companies.
C. The efficient market hypothesis maintains that the capital market will impound accounting
information efficiently into the price of shares. Therefore if Australian companies are required
to report lower earnings through goodwill amortisation they will be valued at a lower amount
than they would otherwise be by investors in the capital market. This would reduce their ability
to bid for other companies in a takeover situation.
D. The amortisation of goodwill can be a very significant cost for companies that have purchased
a reasonable number of subsidiaries. Companies that are active in the takeover market in this
way will be negatively impacted by the reporting of lower profits as a result of Australia's
requirement that they amortise goodwill over a maximum of 20 years, whereas other countries
permit a 40 year or unlimited life for goodwill.
46. The approach to accounting for intangibles raises some issues because:
A. Assets are now subject to impairment testing, which will remove the professional judgment
required for amortisation.
B. Consistency has now been achieved regarding research and development meaning entities
cannot claim to have expended resources on potential benefits while other entities could not.
C. Many intangible assets will not be recognised under this approach, particularly in regard to
internally generated assets.
D. Intangible assets are more likely to be recorded at fair values because of the active market
criteria, which may overstate asset values.
47. Prior to the introduction of AASB 138 companies had found ways to circumvent the requirements
of the revised (1996) version of AASB 1013. These methods included:
A. because where managers were rewarded based on profits attained it was in their best interests
to reduce expenses while they held that position.
B. because contractual arrangements such as debt covenants often required asset values to be
maximised.
C. because recording higher amortisation expenses allowed profits to be reduced, thus allowing
tax payments to be minimised without any cash outflows.
D. because where managers were rewarded based on profits attained it was in their best
interests to reduce expenses while they held that position and because contractual
arrangements such as debt covenants often required asset values to be maximised.
49. During 2001 the Financial Accounting Standards Board in the United States indicated they would
look to change a requirement for the treatment of goodwill. That change is:
A. to remove the requirement to amortise goodwill and replace it with a requirement to write down
goodwill to reflect any impairment in value.
B. to allow the recognition of internally generated goodwill.
C. to extend the period over which goodwill may be amortised.
D. to allow the inverted sum-of-digits method of amortisation.
50. Big Ltd has purchased 100% of Little Ltd for a cash payment of $800 000. The additional costs to
Big Ltd to complete the purchase were $3000. An extract from the statement of financial position
for Little Ltd at the date of acquisition shows:
Additional information:
The assets and liabilities of Little Ltd are stated at fair value except that:
Land and buildings have a fair value of $300 000
Accounts receivable have a fair value of $20 000.
Little owns a licence that has not been recorded in the accounts. Its fair value is $150 000.
What is the amount of purchased goodwill that has been acquired by Big Ltd?
A. $242 000
B. $344 000
C. $252 000
D. $102 000
51. As part of adopting IFRS, goodwill acquired in a business combination is no longer amortised.
Instead, the acquirer shall test goodwill for impairment (AASB 3 Business Combinations). When
is goodwill considered to be impaired?
A. If the recoverable amount of the cash generating unit is greater than the unit's carrying
amount.
B. If the recoverable amount of the cash generating unit is less than the unit's carrying amount.
C. If the value in use of the cash generating unit is greater than the unit's carrying amount.
D. If the fair value less costs to sell is greater than the unit's carrying amount.
52. Which of the following statement(s) in regard to goodwill is/are correct in accordance with AASB
136 Impairment of Assets?
A. An impairment loss must be recognised when the carrying amount of a cash-generating unit
exceeds its recoverable amount.
B. An impairment loss recognised for goodwill shall not be reversed in a subsequent period.
C. Value in use is the present value of future cash flows expected to be derived from a cash-
generating unit.
D. All of the given statements are correct.
53. Which of the following statements in regard to goodwill is/are correct in accordance with AASB
136 Impairment of Assets?
54. After initial recognition, the acquirer shall recognise goodwill at:
A. historical cost.
B. fair value.
C. cost less accumulated amortisation.
D. cost less accumulated impairment losses.
55. Which of the following intangible assets should be recognised in the statement of financial
position?
56. Which of the following combination best demonstrates the value of goodwill?
I. purchase consideration of subsidiary
II. book value of net assets held by subsidiary
III. fair value of net identifiable assets
IV. contingent liabilities
A. I less II
B. I less III
C. I less (II–IV)
D. I less (III–IV)
57. Broadbeach Ltd is a manufacturing company with three subsidiaries. The following information
relates to the goodwill account of Broadbeach Ltd for the year ended 30 June 2009.
In accordance with AASB 136, what is the net effect of above goodwill accounts on the statement
of comprehensive income and statement of financial position of Broadbeach Ltd?
A.
B.
C.
D.
58. Broadbeach Ltd is a manufacturing company with three subsidiaries. The following information
relates to the goodwill account of Broadbeach Ltd for the year ended 30 June 2009:
What is the carrying amount of goodwill as at 30 June 2009 consistent with AASB 136
Impairment of Assets?
A. Zero
B. $100 000
C. S140 000
D. $150 000
59. Which of the following statements is correct with respect to intangible assets?
A. Internally generated publishing titles may be revalued if fair value is determined by reference to
an active market.
B. Purchased goodwill should be amortised over a period of 20 years.
C. Internally generated brands are not recognised as intangible assets because expenditures in
these assets are not distinguishable from the cost of developing the business as a whole.
D. Internally generated brands are recognised as intangible assets because expenditures in
these assets are not distinguishable from the cost of developing the business as a whole.
60. Which of the following expenses are likely to satisfy the definition of an asset, and hence may be
capitalised as an intangible asset?
In accordance with AASB 136 Impairment of Assets what should be the carrying amount of
buildings as at 30 June 2012?
A. $720 000
B. $760 000
C. $800 000
D. $900 000
62. Palm Beach Ltd has a cash generating unit (CGU) and has been assessed for impairment and it
has determined an impairment loss of $100 000.
The following information relates to the assets as at 30 June 2012.
In accordance with AASB 136 Impairment of Assets what should be the carrying amount of
equipment as at 30 June 2012?
A. $0
B. $100 000
C. $150 000
D. $190 000
63. Shelley Beach Ltd has one cash generating unit (CGU) and it has been determined that the CGU
has incurred an impairment loss of $80 000 for the year ended 30 June 2012.
The carrying amounts of the assets as at 30 June 2012 are as follows:
In accordance with AASB 136 Impairment of Assets, what should be the carrying amounts for
buildings, equipment and goodwill as at 30 June 2012, respectively?
In accordance with AASB 136 Impairment of Assets, what is the appropriate journal entry to
recognise the impairment loss for Shelley Beach Ltd?
A.
B.
C.
D.
65. An intangible asset with a finite useful life can be amortised when:
67. The gain or loss on the disposal of an intangible asset is determined as the difference between:
68. Which of the following is not a directly attributable cost of research and development?
A. costs of employee benefits arising from the generation of the intangible asset
B. fees to register a legal right
C. costs of materials consumed in generating the intangible asset
D. All of the given answers are correct.
69. Discuss the benefits of subjecting goodwill to impairment testing as opposed to amortisation. In
your answer, consider the relevance and faithfully represented qualitative characteristics of
financial information.
70. Explain how AASB 138 Intangible Assets may advantage Australian companies with heavy
research and development activities. Contrast this with US companies.
71. Outline the requirements of AASB 138 on recognition and measurement of research and
development activities.
72. Discuss the considerations outlined in AASB 138 on revaluation of intangible assets. What are
the implications of this standard on the relevance of financial information?
73. Discuss the factors considered to determine amortisation of deferred development costs.
74. Explain why research expenditures and expenditures on internally generated such as, brands,
mastheads and publishing titles are not capitalised regardless of whether they are likely to
generate future economic benefits.
75. Explain why intangible assets are required to be reported as a separate class of asset in the
statement of financial position.
76. Discuss the concerns held by Australia corporate executives on the amortisation of intangibles
prior to Australia's 2005 adoption of IFRS.
77. Explain the difference between an ‘infinite life' and an ‘indefinite life'.
Chapter 08 Key
1. Intangible assets that are amortised are no longer subjected to impairment testing.
FALSE
Chapter - Chapter 08 #1
Difficulty: Easy
Section: 8.04 General amortisation requirements for intangible assets
FALSE
Chapter - Chapter 08 #2
Difficulty: Easy
Section: 8.08 Research and development
3. Internally generated brands, mastheads, publishing titles and customer lists are permitted to
be recognised as intangible assets.
FALSE
Chapter - Chapter 08 #3
Difficulty: Easy
Section: 8.01 Introduction to accounting for intangible assets
4. AASB 138 permits the use of revaluation model for intangible assets if there is an active
market to determine fair value.
TRUE
Chapter - Chapter 08 #4
Difficulty: Medium
Section: 8.05 Revaluation of intangible assets
5. The revaluation model requires all intangible assets in the same class to have a fair value
determined by reference to an active market.
TRUE
Chapter - Chapter 08 #5
Difficulty: Medium
Section: 8.07 Required disclosures in relation to intangible assets
6. If the fair value of a revalued intangible asset can no longer be determined by reference to an
active market, AASB 136 requires the use of the cost model.
FALSE
Chapter - Chapter 08 #6
Difficulty: Medium
Section: 8.08 Research and development
7. Internally generated identifiable intangible assets may be recognised for financial accounting
purposes in Australia.
TRUE
Chapter - Chapter 08 #7
Difficulty: Easy
Section: 8.10 Is the way we account for intangible assets an improvement over what we did in Australia before the introduction of IFRS in 2005?
FALSE
Chapter - Chapter 08 #8
Difficulty: Easy
Section: 8.09 Accounting for goodwill
9. There are only rare occasions when an identifiable intangible asset should be amortised.
FALSE
Chapter - Chapter 08 #9
Difficulty: Easy
Section: 8.09 Accounting for goodwill
10. International convergence has meant that there is no longer one specific standard related to
intangibles
FALSE
Chapter - Chapter 08 #10
Difficulty: Medium
Section: 8.10 Is the way we account for intangible assets an improvement over what we did in Australia before the introduction of IFRS in 2005?
11. Development costs are less likely to meet the test for deferral than research costs.
FALSE
Chapter - Chapter 08 #11
Difficulty: Easy
Section: 8.08 Research and development
12. Compared to the requirement in the US, the treatment of research and development costs in
Australia is less conservative (that is, likely to result in higher profits).
TRUE
Chapter - Chapter 08 #12
Difficulty: Medium
Section: 8.08 Research and development
13. AASB 138 requires that all intangibles, whether purchased or internally generated, be
capitalised.
FALSE
Chapter - Chapter 08 #13
Difficulty: Easy
Section: 8.01 Introduction to accounting for intangible assets
FALSE
Chapter - Chapter 08 #14
Difficulty: Medium
Section: 8.09 Accounting for goodwill
15. Intangible assets without a limited useful life cannot be recorded under AASB 138 as they
cannot be amortised.
FALSE
Chapter - Chapter 08 #15
Difficulty: Easy
Section: 8.04 General amortisation requirements for intangible assets
16. According to AASB 138 on intangible assets, if an entity buys another entity separate values
can be assigned to purchased goodwill and to a brand name.
TRUE
Chapter - Chapter 08 #16
Difficulty: Easy
Section: 8.01 Introduction to accounting for intangible assets
17. Expenditure on an intangible asset that was initially expensed may be recognised as part of an
intangible asset at a later date.
FALSE
Chapter - Chapter 08 #17
Difficulty: Easy
Section: 8.03 What is the initial basis of measurement of intangible assets?
18. AASB 138 prohibits the recognition of intangible assets using the revaluation model.
FALSE
Chapter - Chapter 08 #18
Difficulty: Easy
Section: 8.02 Which intangible assets can be recognised and included in the statement of financial position?
19. The cost of a separately acquired intangible asset includes its purchase price and directly
attributable cost for preparing the asset for its intended use.
TRUE
Chapter - Chapter 08 #19
Difficulty: Easy
Section: 8.03 What is the initial basis of measurement of intangible assets?
20. Where a revaluation occurs, it is to be to the fair value of the asset.
TRUE
Chapter - Chapter 08 #20
Difficulty: Easy
Section: 8.05 Revaluation of intangible assets
A. loyal customers.
B. patents and trademarks.
C. provisions.
D. loyal customers, patents and trademarks.
Chapter - Chapter 08 #22
Difficulty: Easy
Section: 8.01 Introduction to accounting for intangible assets
A. They are not subject to the recognition criteria of other assets and may be recorded if they
satisfy the three elements of the definition.
B. They must be expensed immediately, as assets must be able to be measured.
C. They have no real value and should be excluded from accounting reports.
D. None of the given answers are correct.
Chapter - Chapter 08 #24
Difficulty: Easy
Section: 8.01 Introduction to accounting for intangible assets
26. In order to determine whether or not expenditure should be treated as an intangible asset, the
relevant test to apply in Australia is:
A. It should be recognised when (a) it is definite that future economic benefits will eventuate or
(b) the asset possesses a cost or other value that can be measured reliably.
B. It should be recognised if (a) the expenditure is with an external party in an arm's length
transaction for a separately identifiable intangible asset or (b) the intangible asset arises as
the difference between the net tangible assets of an entity and the price paid for that entity.
C. It should be recognised if (a) it is part of a specified plan by management to develop and
maintain a separately identifiable asset or (b) the intangible asset was purchased in an
arm's length transaction and is actively traded in a market.
D. It should be recognised when and only when (a) it is probable that future economic benefits
will eventuate and (b) the asset possesses a cost or other value that can be measured
reliably.
Chapter - Chapter 08 #26
Difficulty: Easy
Section: 8.02 Which intangible assets can be recognised and included in the statement of financial position?
27. AASB 138 states that intangible assets:
A. may not be revalued and must be amortised over their useful lives.
B. are only able to be revalued if they have been internally generated and there is an active
market for them.
C. may only be revalued to their fair value as assessed by a licensed valuer.
D. may be measured by using either the cost model or the revaluation model.
Chapter - Chapter 08 #27
Difficulty: Easy
Section: 8.03 What is the initial basis of measurement of intangible assets?
A. the activities undertaken with specific commercial objectives, including original research, to
develop plans or designs for new products or significant improvements to existing products.
B. the application of research findings or other knowledge to a plan or design for the
production of new or substantially improved material, devices, processes, systems or
services prior to the commencement of commercial production or use.
C. the activities undertaken to translate research findings into feasible projects for subsequent
development for commercial objectives such that the recoverable amount is expected to be
greater than the cost.
D. the activities undertaken with the expectation by management that future economic benefits
in the form of new products or improvements to existing products are likely to result, based
on research completed to date.
Chapter - Chapter 08 #28
Difficulty: Easy
Section: 8.08 Research and development
29. What is the test for deferral of research costs as required by AASB 138?
A. Research costs can be deferred (recorded as an asset) when it is probable that the project
they are applied to will bring future economic benefits.
B. Research costs may not be deferred unless it is almost certain that the project they are
applied to will bring future economic benefits.
C. Research costs may not be recorded as an intangible asset.
D. Research costs may be deferred if the entity can demonstrate that an intangible asset
exists and that it will generate future economic benefits.
Chapter - Chapter 08 #29
Difficulty: Easy
Section: 8.08 Research and development
30. Which of the following statements is correct with respect to research and development
expenditures in accordance with AASB 138?
31. The requirement of AASB 138 in relation to the amortisation of development cost is that:
32. Glass 4 Windows is involved in a research and development project to create a filtering
window that removes the need for curtains. For the current year ended 30 June 2011
expenditure on the project is as follows:
The window is expected to earn revenues of $70 000 per year for the 10 years commencing 1
July 2011. Assuming straight-line amortisation, how much of the research and development
cost should be expensed this period and what amount should be amortised in the year ended
30 June 2014?
33. Walking on Air is developing a new form of individual transport that will act like a personal
hovercraft. Costs for the year ended 30 June 2012 are:
Due to the high individual cost of items, sales of this 'prototype' model will be small and
generate $100 000 per year over the next 4 years. Following that time, a new and cheaper
consumer model will be under production based on the research developed for the prototype;
however, it will require additional development expenditure. How much of the research and
development cost should be expensed in the period ended 30 June 2012 and what amount
should be amortised in the year ended 30 June 2006 (rounded to the nearest dollar)?
34. There is a concern that research and development may be reduced as a result of the new
requirements in AASB 138 because:
A. Companies will not have the cash available to pay for the research expenses up-front.
B. Recognising expenses early will allow for larger profits later, which will help smaller firms.
C. The 'horizon problem' suggests managers will not invest in long-term projects that do not
immediately increase profits.
D. Shareholders are only interested in short-term profits and will not be impressed by
strategies that attempt to increase the long-term value of their shares.
Chapter - Chapter 08 #34
Difficulty: Medium
Section: 8.08 Research and development
35. Castle Co Ltd is working on three research projects. Project Jonah is government-sponsored
research on synthesising currently available research results on the possible triggers of
asthma attacks. Project Beta involves researching the genetic tags associated with heart
disease based on the genome project. A test to identify the predisposition to heart disease in
children has been developed and will be on the market in 2013. Since 2011 research and
development expenditures on this project are applied development costs only. Project Sigma
is cutting edge research being conducted to try and discover a means of 'disassembling'
molecules and then 'reassembling' them in their original form. The company hopes that this
work will lay the basis for future dreams of teleportation as a method of transport. Details of
expenditures and recoverable amounts expected beyond a reasonable doubt at this time are:
What is the total research and development deferral for each project as at the end of the year
2012?
What is the research and development deferral for each project in 2013?
37. AASB 138 describes the distinction between the treatment of internally generated goodwill and
purchased goodwill (as well as other intangibles) as arising because:
A. The two different sources of goodwill result in two different types of asset.
B. Internally generated goodwill is developed in order to be sold, so its value will be
recognised at that time.
C. Internally generated goodwill cannot be reliably measured.
D. Recording purchased goodwill could lead to the manipulation of profit and asset amounts.
Chapter - Chapter 08 #37
Difficulty: Easy
Section: 8.09 Accounting for goodwill
38. The treatment of internally generated goodwill varies from purchased goodwill under AASB
138 in that:
A. the excess of the cost of acquisition incurred by an acquirer over the fair value of the
identifiable net assets acquired.
B. the difference between the cost of acquisition of a subsidiary and the realisable value of net
assets of the subsidiary.
C. the lower of the sum of related expenditures on advertising and promotion undertaken in
the last 2 years by the subsidiary being purchased and the independent valuation of the
market value of that subsidiary's goodwill.
D. the excess of the cost of acquisition incurred by an acquirer over the fair value of the
identifiable net assets and contingent liabilities acquired.
Chapter - Chapter 08 #39
Difficulty: Easy
Section: 8.09 Accounting for goodwill
40. Far-flung Co Ltd purchases Local Co Ltd for the purchase consideration of:
Far-flung incurred legal fees of $6000 to complete the acquisition. Local Co Ltd had the
following assets and liabilities at the time of the purchase
A. $0
B. $80 000
C. $141 000
D. $86 000
Chapter - Chapter 08 #40
Difficulty: Medium
Section: 8.09 Accounting for goodwill
41. Earth Ltd acquired Moon Ltd on 1 July 2009 for the sum of $100 000. On the same date Moon
Ltd has the following assets and liabilities:
42. Buster Ltd had purchased goodwill to the value of $100 000 recorded in its consolidated
financial statements. The goodwill has been determined to have an indefinite useful life.
However, one year later Buster Ltd's cash generating units has been determined to have
incurred an impairment loss of $13 000. What is the appropriate action for Buster limited to
comply with AASB 138 Intangible Assets and AASB 136 Impairment of Assets?
A. The choice to use the inverted sum-of-digits method was phased out over a period of 15
years, to be replaced by straight-line depreciation.
B. The option to amortise goodwill was removed and replaced with annual impairment testing.
C. Entities were given the option of continuing to amortise goodwill or to subject it to
impairment testing each year.
D. All entities were required to amortise goodwill over 20 years using the straight-line method
to allow comparisons.
Chapter - Chapter 08 #43
Difficulty: Easy
Section: 8.09 Accounting for goodwill
44. AASB 138 contains some elements that seem to be reactions to opportunistic behaviour by
preparers of accounts and to the degree of uncertainty surrounding goodwill as an
unidentifiable intangible asset. These elements include:
A. The research that has shown accounting figures to be used in a mechanistic way suggests
that Australian firms will be disadvantaged relative to international competitors in the
takeovers market.
B. Sophisticated users will be aware that there are no direct cash-flow effects of the different
amortisation treatments for goodwill. The effect of differential taxation treatments (since the
ATO does not permit a deduction for the amortisation of goodwill) will, however, have a
negative impact on Australian companies.
C. The efficient market hypothesis maintains that the capital market will impound accounting
information efficiently into the price of shares. Therefore if Australian companies are
required to report lower earnings through goodwill amortisation they will be valued at a
lower amount than they would otherwise be by investors in the capital market. This would
reduce their ability to bid for other companies in a takeover situation.
D. The amortisation of goodwill can be a very significant cost for companies that have
purchased a reasonable number of subsidiaries. Companies that are active in the takeover
market in this way will be negatively impacted by the reporting of lower profits as a result of
Australia's requirement that they amortise goodwill over a maximum of 20 years, whereas
other countries permit a 40 year or unlimited life for goodwill.
Chapter - Chapter 08 #45
Difficulty: Medium
Section: 8.09 Accounting for goodwill
46. The approach to accounting for intangibles raises some issues because:
A. Assets are now subject to impairment testing, which will remove the professional judgment
required for amortisation.
B. Consistency has now been achieved regarding research and development meaning entities
cannot claim to have expended resources on potential benefits while other entities could
not.
C. Many intangible assets will not be recognised under this approach, particularly in regard to
internally generated assets.
D. Intangible assets are more likely to be recorded at fair values because of the active market
criteria, which may overstate asset values.
Chapter - Chapter 08 #46
Difficulty: Medium
Section: 8.01 Introduction to accounting for intangible assets
Section: 8.02 Which intangible assets can be recognised and included in the statement of financial position?
Section: 8.03 What is the initial basis of measurement of intangible assets?
47. Prior to the introduction of AASB 138 companies had found ways to circumvent the
requirements of the revised (1996) version of AASB 1013. These methods included:
48. Prior to the introduction of impairment testing companies had attempted to manipulate their
accounts through amortisation:
A. because where managers were rewarded based on profits attained it was in their best
interests to reduce expenses while they held that position.
B. because contractual arrangements such as debt covenants often required asset values to
be maximised.
C. because recording higher amortisation expenses allowed profits to be reduced, thus
allowing tax payments to be minimised without any cash outflows.
D. because where managers were rewarded based on profits attained it was in their best
interests to reduce expenses while they held that position and because contractual
arrangements such as debt covenants often required asset values to be maximised.
Chapter - Chapter 08 #48
Difficulty: Easy
Section: 8.09 Accounting for goodwill
49. During 2001 the Financial Accounting Standards Board in the United States indicated they
would look to change a requirement for the treatment of goodwill. That change is:
A. to remove the requirement to amortise goodwill and replace it with a requirement to write
down goodwill to reflect any impairment in value.
B. to allow the recognition of internally generated goodwill.
C. to extend the period over which goodwill may be amortised.
D. to allow the inverted sum-of-digits method of amortisation.
Chapter - Chapter 08 #49
Difficulty: Easy
Section: 8.09 Accounting for goodwill
50. Big Ltd has purchased 100% of Little Ltd for a cash payment of $800 000. The additional costs
to Big Ltd to complete the purchase were $3000. An extract from the statement of financial
position for Little Ltd at the date of acquisition shows:
Additional information:
The assets and liabilities of Little Ltd are stated at fair value except that:
Land and buildings have a fair value of $300 000
Accounts receivable have a fair value of $20 000.
Little owns a licence that has not been recorded in the accounts. Its fair value is $150 000.
What is the amount of purchased goodwill that has been acquired by Big Ltd?
A. $242 000
B. $344 000
C. $252 000
D. $102 000
Chapter - Chapter 08 #50
Difficulty: Medium
Section: 8.09 Accounting for goodwill
51. As part of adopting IFRS, goodwill acquired in a business combination is no longer amortised.
Instead, the acquirer shall test goodwill for impairment (AASB 3 Business Combinations).
When is goodwill considered to be impaired?
A. If the recoverable amount of the cash generating unit is greater than the unit's carrying
amount.
B. If the recoverable amount of the cash generating unit is less than the unit's carrying
amount.
C. If the value in use of the cash generating unit is greater than the unit's carrying amount.
D. If the fair value less costs to sell is greater than the unit's carrying amount.
Chapter - Chapter 08 #51
Difficulty: Medium
Section: 8.09 Accounting for goodwill
52. Which of the following statement(s) in regard to goodwill is/are correct in accordance with
AASB 136 Impairment of Assets?
53. Which of the following statements in regard to goodwill is/are correct in accordance with AASB
136 Impairment of Assets?
A. historical cost.
B. fair value.
C. cost less accumulated amortisation.
D. cost less accumulated impairment losses.
Chapter - Chapter 08 #54
Difficulty: Easy
Section: 8.09 Accounting for goodwill
55. Which of the following intangible assets should be recognised in the statement of financial
position?
56. Which of the following combination best demonstrates the value of goodwill?
I. purchase consideration of subsidiary
II. book value of net assets held by subsidiary
III. fair value of net identifiable assets
IV. contingent liabilities
A. I less II
B. I less III
C. I less (II–IV)
D. I less (III–IV)
Chapter - Chapter 08 #56
Difficulty: Medium
Section: 8.09 Accounting for goodwill
57. Broadbeach Ltd is a manufacturing company with three subsidiaries. The following information
relates to the goodwill account of Broadbeach Ltd for the year ended 30 June 2009.
In accordance with AASB 136, what is the net effect of above goodwill accounts on the
statement of comprehensive income and statement of financial position of Broadbeach Ltd?
A.
B.
C.
D.
Translator: V. K. Trast
Language: Finnish
Romaani
Kirj.
F. M. DOSTOJEVSKI
Suomentanut
V. K. Trast
NELJÄS OSA
Kymmenes kirja: Pojat
1. Grušenjkan luona
2. Kipeä jalka
3. Reuhtova lapsi
4. Hymni ja salaisuus
5. Et sinä, et sinä
6. Ensimmäinen keskustelu Smerdjakovin kanssa
7. Toinen käynti Smerdjakovin luona
8. Kolmas ja viimeinen käynti Smerdjakovin luona
9. Piru. Ivan Fjodorovitšin painajainen
10. »Hän sen sanoi!»
EPILOGI
Kahdeksas kirja
Mitja
1.
Kuzjma Samsonov
Dmitri Fjodorovitš, jolle Grušenjka lentäessään uuteen elämään oli
»käskenyt» sanomaan viimeisen tervehdyksensä ja käskenyt
ikuisesti muistamaan hänen lempensä tunnin, oli tällä hetkellä,
tietämättä mitään siitä, mitä Grušenjkalle oli tapahtunut, niinikään
suuren ahdistuksen ja huolten vallassa. Viimeisinä kahtena päivänä
hän oli ollut sellaisessa sanoin kuvaamattomassa tilassa, että olisi
todellakin voinut saada aivokuumeen, niinkuin hän itse myöhemmin
sanoi. Aljoša ei ollut edellisen päivän aamuna voinut saada häntä
käsiinsä, eikä veli Ivan samana päivänä saanut toimeen kohtausta
hänen kanssaan ravintolassa. Hänen asuntonsa isäntäväki peitti
hänen käskystään hänen jälkensä. Hän oli näinä kahtena päivänä
aivan sananmukaisesti häärinyt joka puolella, »taistellen kohtaloaan
vastaan ja koettaen pelastaa itsensä», kuten hän myöhemmin
lausui, olipa muutamaksi tunniksi erään polttavan asian vuoksi
kiitänyt pois kaupungista, vaikka hänestä oli kauheata poistua ja
jättää Grušenjka vaikkapa hetkeksikin näkyvistään. Kaikki tämä
selvitettiin myöhemmin mitä seikkaperäisimmin ja asiakirjain
perusteella, mutta nyt mainitsemme vain kaikkein välttämättömimmät
kohdat näiden hänen elämänsä kahden kauhean päivän historiasta,
jotka hän eli sen hirveän katastrofin edellä, joka niin äkkiä järkähdytti
hänen kohtaloaan.
Omituista: luulisi, että kun hän oli näin päättänyt, niin hänellä ei
enää voinut olla jäljellä mitään muuta kuin epätoivo; sillä mistä
saattoi äkkiä ottaa sellaisen rahasumman, varsinkin hänen
kaltaisensa köyhä raukka? Mutta kuitenkin hän koko tuon ajan
loppuun asti toivoi, että saa nuo kolmetuhatta, että ne tulevat,
lentävät hänelle ikäänkuin itsestään, vaikkapa taivaasta. Niinpä juuri
onkin sellaisten laita, jotka niinkuin Dmitri Fjodorovitškin koko
elämänsä ajan osaavat vain tuhlata ja panna menemään perittyjä,
vaivatta saatuja rahoja, mutta joilla ei ole mitään käsitystä siitä, miten
rahaa hankitaan. Mitä fantastisimpia ajatuksia oli alkanut pyöriä
hänen päässään heti sen jälkeen kuin hän toissa päivänä oli eronnut
Aljošasta, ja hänen kaikki ajatuksensa menivät aivan sekaisin. Siitä
johtui, että hän ensimmäiseksi ryhtyi sangen hurjaan yritykseen.
Niin, kenties juuri tämmöisissä tiloissa tämänkaltaisista ihmisistä
kaikkein mahdottomimmat ja fantastisimmat yritykset näyttävät
ensimmäisiltä mahdollisilta. Hän päätti äkkiä mennä kauppias
Samsonovin, Grušenjkan suojelijan luo ja esittää hänelle erään
»suunnitelman», saada häneltä tätä »suunnitelmaa» vastaan heti
koko tarvitsemansa rahasumman; suunnitelmaa liikeyrityksenä
ajatellen hän ei epäillyt ollenkaan, vaan epäili ainoastaan sitä, miten
arvostelee hänen päähänpälkähdystään itse Samsonov, jos hän ei
tahdo katsoa sitä ainoastaan liikeyrityksen kannalta. Vaikka Mitja
tunsikin tämän kauppiaan ulkonäöltä, niin hän ei kuitenkaan ollut
tuttu hänen kanssaan eikä edes ollut kertaakaan puhunut hänen
kanssaan. Mutta jostakin syystä hänessä jo kauan sitten oli syntynyt
vakaumus, että tämä vanha irstailija, joka nyt oli henkihieverissä, nyt
kenties ei ollenkaan olisi sitä vastaan, että Grušenjka järjestäisi
elämänsä jollakin kunniallisella tavalla ja menisi naimisiin
»luotettavan miehen» kanssa. Eikä hän vain ole panematta vastaan,
vaan haluaa itsekin sitä ja tilaisuuden ilmaantuessa itsekin on valmis
asiaa edistämään. Joistakin huhuistako vai joistakin Grušenjkan
sanoistako Mitja lienee myös tehnyt sen johtopäätöksen, että ukko
kenties soisi Grušenjkalle mieluummin hänet kuin Fjodor Pavlovitšin.
Kenties monen kertomuksemme lukijan mielestä tämä hänen
luulonsa, että saisi tuolla tavoin apua, ja hänen aikeensa ottaa
morsiamensa niin sanoakseni tämän suojelijan käsistä, tuntuu liian
karkealta ja häikäilemättömältä Dmitri Fjodorovitšin puolelta. Voin
huomauttaa vain sen, että Grušenjkan entisyys näytti Mitjan mielestä
olevan jo kokonaan lopussa. Hän katseli tätä menneisyyttä
rajattomalla säälillä ja päätti intohimonsa koko hehkulla, että kun
Grušenjka lausuu hänelle rakastavansa häntä ja menevänsä hänen
kanssaan naimisiin, niin samassa heti on olemassa uusi Grušenjka
ja yhdessä hänen kanssaan myös aivan uusi Dmitri Fjodorovitš,
ilman mitään vikoja ja vain hyveellinen: he kumpikin antavat anteeksi
toisilleen ja alkavat elää aivan uudella tavalla. Mitä taas tulee
Kuzjma Samsonoviin, niin tätä hän piti tuossa Grušenjkan entisessä,
jo ohitse menneessä elämänkaudessa Grušenjkan elämään
kohtalokkaasti vaikuttaneena miehenä, jota Grušenjka ei kuitenkaan
koskaan ollut rakastanut ja joka myös, se oli tässä tärkeintä, jo oli
»mennyt ohi», oli loppunut, niin että häntäkään nyt ei lainkaan ollut
olemassa. Kaiken lisäksi Mitja ei voinut enää pitää häntä
ihmisenäkään, sillä tunnettua oli kaikille ja koko kaupungille, että hän
oli vain sairas raunio, joka oli säilyttänyt Grušenjkaan niin
sanoakseni vain isällisen suhteen, aivan toisella pohjalla kuin ennen,
ja että näin oli ollut jo pitkän aikaa. Joka tapauksessa tässä oli paljon
vilpittömyyttäkin Mitjan puolelta, sillä kaikista vioistaan huolimatta
hän oli sangen suora mies. Tämän suoruutensa vuoksi hän muun
muassa oli vakavasti vakuutettu siitä, että vanha Kuzjma nyt
valmistautuessaan lähtemään toiseen maailmaan tuntee vilpitöntä
katumusta entisen käytöksensä johdosta Grušenjkaa kohtaan ja ettei
Grušenjkalla ole uskollisempaa suojelijaa ja ystävää kuin tämä nyt jo
vaaraton ukko.