RMIT Classification: Trusted

Chapter 8 - QUESTIONS
Accounting for intangibles

8.4. What activities should be included in the cost of research and development? In your
answer differentiate between research activities and development activities.

8.7. What is the difference between an unidentifiable intangible asset and an

identifiable intangible asset?

8.8. How is the value of goodwill determined for accounting purposes?

8.12. Which of the following costs would be included as part of (i) research costs or (ii)
development costs for a project to improve the production process of a confectionery
plant?
a. depreciation of administrative equipment during the research phase of the
project
b. salaries of administrative staff during the development phase of the project
c. salaries of staff working half-time on the research project and half-time on other
work
d. depreciation of laboratory equipment used to undertake development of the new
production process
e. consulting fees paid to outside consultants used in the research phase and
development phase of the project
f. raw materials used in the research phase and development phase of the project.

8.14. What is an active market, and is an active market likely to exist for intangible
assets such as brand names or development related expenditures? Explain your answer.

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 RMIT Classification: Trusted

8.33. IP Ltd reports the following intangible assets:

$m
Patents at directors’ valuation 160
less Accumulated amortisation (40)
120
Trademarks, at cost 15
Goodwill, at cost 50
less Accumulated amortisation (10)
40
Brand name 100
Licence at cost 10
less Accumulated amortisation (1)
9

 Patents were acquired at a cost of $80 million and were revalued soon afterwards.
They have an estimated life of 16 years, of which 12 years remain.
 The trademark can be renewed indefinitely, subject to continued use. The cost
represents registration fees, which were initially expensed but recognised five years
later after the trademark had started to become recognised by consumers.
 Goodwill has been purchased and amortised on the straight-line basis.
 The brand name is stated at fair value and is internally generated.
 The licence has a 10-year life of which nine years remain. The licence can be traded
in an active market and has a fair value of $17 million.

REQUIRED
a. State how each asset, or class of assets, should be reported in accordance with
AASB 138.
b. Apply AASB 138 and state the carrying amount and whether each asset/asset
class should be amortised. Specify any choice of methods permitted for IP Ltd.

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