Field Corp.’s controller was preparing the adjusting entries for the company’s year ended December 31, 2023, when the vice-president of finance called him into her office.

“Jean-Pierre,” she said, “I’ve been considering a couple of matters that may require different treatment this year. First, the patent we acquired in early January 2021 for $525,000 will now likely be used until the end of 2025 and then be sold for $170,000. We previously thought that we’d use it for 10 years in total and then be able to sell it for $115,000. We’ve been using straight-line amortization on the patent.

“Second, I just discovered that the property we bought on July 2, 2020, for $260,000 was charged entirely to the Land account instead of being allocated between Land ($60,000) and Building ($200,000). The building should be of use to us for a total of 20 years. At that point, it’ll be sold and we should be able to realize at least $50,000 from the sale of the building.

“Please let me know how these changes should be accounted for and what effect they will have on the financial statements.”

Instructions

Field follows IFRS. Answer the following, ignoring income tax considerations and assuming that the company has not previously reported quarterly results.

a. Briefly identify the accounting treatment that should be applied to each accounting change that is required.

b. Assuming that no amortization has been recorded yet for the patent for 2023, prepare the December 31, 2023 entries that are necessary to make the accounting changes and to record patent amortization expense for 2023.

c. Identify, and calculate where possible, the required disclosures for each change.

d. Discuss the timing of applying the change in the patent’s useful life and residual value. Since the determination of the change was done as part of the year-end process, should the change be applied to 2023 going forward, or to 2024 going forward? What are the implications of each approach?

e. Could Field’s controller consider the patent to be impaired instead of revising its useful life and residual value? What criteria should the controller look at to determine the appropriate treatment?