Intangible assets

1. In 2020, NZ Products Ltd spent:

1. $300,000 on promoting recognition of its brand name
2. $500,000 on the acquisition of a patent (the right to produce a particular product)
3. $150,000 on the purchase of a customer database. NZ Products Ltd do not expect that the database will provide a significant number of new customers or any positive future economic benefit. The purchase was made by an inexperienced manager who was swayed by an external sales pitch, ignoring the wisdom and experience of lower-level supervisors and operational staff. The manager was fired for not consulting on the purchase and wasting the firms funds.

Dealing with each of the scenarios separately, advise the CEO how these expenditures should be treated (recorded as an intangible asset, or recorded as an expense) with specific reference to the appropriate accounting standard. Two marks each are allocated for Scenarios i and iii, and three marks for Scenario ii.