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Andrew is a public listed pharmaceutical company. It has been considering the accounting treatment of its intangible assets and has asked for your opinion on

Andrew is a public listed pharmaceutical company. It has been considering the accounting treatment of its intangible assets and has asked for your opinion on how the matters below should be treated in its financial statements for the year to 31 March 2015.

In December 2014, Andrew paid $5m for a television advertising campaign for its products that will run for six months from 1 January 2015 to 30 June 2015. The directors believe that increased sales as a result of the publicity will continue for two years from the start of the advertisements.

Required

(a) In accordance with IAS 38 Intangible Assets, discuss whether intangible assets should be recognized(1 mark), and, if so, how they should be initially and subsequently recognized in the following circumstances:

(i) When they are purchased separately from other assets(1 marks)

(ii) When they are obtained as part of acquiring a whole a business(2 marks)

(iii) When they are developed internally (2 marks)

Note. Your answer should consider goodwill separately from other intangibles.

(b) Explain how the transaction will be accounted for in the financial statements of Andrew for the year ended 31 March 2015 in accordance with IAS 38 (2 marks)

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