Banyan Developments Limited has a year end of 31 March 2021. Its principal activities are providing fitness and welfare services. On 31 March 2021 Banyan Developments Ltd acquired 100% of the share capital of a competitor, Portello Ltd for $4,000,000. The net assets of Portello Ltd at that date were $1,500,000. You are the Financial controller of Banyan Developments Ltd and have reported to your Chief Financial Officer, that in addition to the reported net assets of Portello Ltd you have identified two further intangible assets related to Portello Ltd, including a patent with a remaining useful life of 5 years that you have estimated to be worth $750,000 and a new piece of software about to be launched which you estimate to have a value of $500,000 and to have an estimated useful life of 4 years. The CFO has thanked you for your work, but has stated that he will record goodwill relating to the acquisition of $2.5 Million.

Required:

a. Evaluate why the CFO may not want to record the patent and software development in the acquisition of Portello Ltd.

Banyan Developments Ltd has invested in three development projects during the year as follows:

	INvestment Porject A ($'000)	Investment Project B ($'000)	Investment Porject C ($'000)
development expenditire capitalised at 1 April 2020	1250	550	-
Costs incurred in the year ended 31 March 2020
Salaries		150	100
Materials			50
Market Research	50	10	10

Project A: was for the development of a new cycling fitness machine the “FITCYC” to be used at home. The FITCYC was launched on 1 April 2020 and achieved sales of 50,000 units in the year ended 31 March 2021. Management expect sales to continue for a further 4 years at this level.

Project B: was for the development of an online fitness application with exercise classes hosted by sporting superstars. Whilst it had been expected that the project would be successful a competitor has successfully launched a similar product and management no longer expect the project to be successful.

Project C: is a new project for a new indoor rowing machine. The project is expected to complete in 2022 and management expect the new rowing machine to be highly profitable.

Required:

b. Discuss the criteria for development costs to be capitalised under IAS 38 and evaluate the accounting treatment for each of the three development projects in the financial statements for the year ended 31 March 2021.

c. If Banyan Developments Limited has purchased a customer list for its direct-mailing marketing, and it expects to derive commercial benefits from this information for at least three years. Advise the company on the accounting treatment of this customer list acquired under IAS 38, Intangible Assets.