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Fair Trade Ltd, operating in the Pharmaceutical Industry, is preparing its accounts for the year ended 31 October 2020 and the following information is available
Fair Trade Ltd, operating in the Pharmaceutical Industry, is preparing its accounts for the year ended 31 October 2020 and the following information is available relating to various intangible assets acquired on the acquisition of Ajanta Pharma Ltd. (i) A quota to produce 2,000,000 Covid 19 vaccines at $1 per vaccine. There is an active market trading in vaccine and other quotas. [4 Marks] (ii) A government licence to experiment with the use of hormones to increase the efficiency of the vaccine had been granted to Ajanta Pharma Ltd shortly before the acquisition by Fair Trade Ltd. No fee had been required. This is the first licence to be granted by the Government and was one of the reasons that Fair Trade Ltd acquired Ajanta Pharma Ltd. The licence is not transferable but the directors estimate that it has a value to the company based on discounted cash flows for a five-year period of $1 million. [8 Marks] (iii) Another Vaccine sold under the brand name '' Flu Plus'' was valued by the directors at $2 million. Further enquiry established that a similar brand name had been recently sold for $1.5 million. [6 Marks] REQUIRED Explain how each of the
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