Blue and White Town Taxi Incorporated applied for several taxi licences for its taxicab operations in the Town of Somerville and, on August 31, 2020, incurred costs of $12,500 in the application process. The outcome of applying for taxi licences in the town was uncertain, as Somerville has been known to limit the number of issued taxi licences in an effort to encourage use of public transportation.

The application was successful and on June 30, 2021, Blue and White was granted 30 freely transferable taxi licences for a registration fee of $3,750 per licence. According to management, each licence will have a useful life of only five years from the date of registration, because demand for taxi services in Somerville is expected to decrease significantly after the town’s subway system is expanded. There is an active market for taxi licences in Somerville.

In 2022, in an effort to decrease traffic congestion in its downtown, the town did not issue any new taxi licences, and the fair value of each taxi licence held by Blue and White was $4,200 as at December 31, 2022. In 2024, due to a severe shortage of taxis in the town, Somerville decreased the registration fee and issued many new taxi licences. As at December 31, 2024, each taxi licence had value in use of $5,400, fair value of $3,800, and costs to sell of $200. Blue and White amortizes intangible assets using the straightline method, and prepares financial statements in accordance with IFRS.

Instructions

a. Prepare the entry to record the costs incurred on August 31, 2020.

b. Prepare the entry to record the costs incurred on June 30, 2021.

c. Assume that after initial recognition, Blue and White uses the cost model to measure its intangible assets. Prepare the entries required on December 31, 2022, December 31, 2023, and December 31, 2024, and calculate the carrying amount of the intangible asset, if any, as at December 31, 2024.

d. Assume that after initial recognition, Blue and White uses the revaluation model (asset adjustment method) to measure its intangible assets. Prepare the entries required on December 31, 2022, December 31, 2023, and December 31, 2024, and calculate the carrying amount of the intangible asset, if any, as at December 31, 2024. Assume revaluation adjustments are made on December 31, 2022, and December 31, 2024.

e. Digging Deeper From the perspective of Blue and White’s auditor, discuss the criteria that must be met for the intangible asset to be measured using the revaluation model. Discuss under which financial reporting standards the revaluation model can be applied.