CASE STUDY UNRECORDED ASSETS Lynx Ltd has just acquired all the issued shares of Indus Ltd. The

Question:

CASE STUDY UNRECORDED ASSETS Lynx Ltd has just acquired all the issued shares of Indus Ltd. The accounting staff at Lynx Ltd has been analysing the assets and liabilities acquired as a result of this business combination. This analysis found that Indus Ltd had been expensing its research outlays in accordance with AASB 138/IAS 38 Intangible Assets. Over the past 3 years before the acquisition, the company has expensed a total of $20 000, including $8000 immediately before the acquisition date. One of the reasons that Lynx Ltd acquired Indus Ltd was its promising research findings in an area that could benefit the products being produced by Lynx Ltd. There is disagreement among the accounting staff as to how to account for the research outlays of Indus Ltd. Some of the staff argue that, since it is research expenditure, the correct accounting treatment is to expense it, and so no adjustments need to be done on consolidation. Other members of the accounting staff believe that it should be recognised on consolidation as an asset, but are unsure of the accounting entries to use, and are concerned about the future effects of recognition of an asset. Required Advise the accountants that prepare the consolidated financial statements of Lynx Ltd on what accounting choice is the most appropriate in these circumstances. CASE STUDY

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Financial Reporting

ISBN: 978-0730363361

2nd Edition

Authors: Janice Loftus ,Ken Leo ,Sorin Daniliuc ,Belinda Luke ,Hong Nee Ang ,Karyn Byrnes

Question Posted: