Intangible Assets Topic 5

-Which of the following assets is regarded as meeting the identifiability criteria for recognition as an identifiable intangible asset that can be recorded as acquired in a business combination?

a.customer base

b.royalty agreements

c.ongoing recruitment programs

d.strong and favourable employee relations.

AASB 138 Intangibles, requires that the following items in relation to intangibles, each be disclosed separately:

a.the opening balance of each intangible

b.the closing balance of each intangible

c.any impairment losses reversed in profit or loss during the period

d.all amounts of intangibles acquired during the period.

-A key characteristic that separates assets such as property, plant and equipment from intangible assets is:

a.separability

b.length of useful life

c.lack of physical substance

d.reliability.

-Unless acquired under a business combination, intangible assets must be initially measured using which of the following measurement approaches?

a.discounted cash flows

b.fair value

c.net present value

d.cost.

-The characteristic that distinguishes the goodwill from other intangible assets is:

a.identifiability

b.its nature as a monetary asset

c.that is has a physical embodiment

d.it can be separated from the entity and sold individually.

Under AASB 138 Intangibles, goodwill may only be recognised as an asset if it:

a.arises as a result of creating new assets within the normal business operations

b.does not exceed its internally recorded cost

c.is internally generated

d.is acquired as part of a business combination.

-Which of the following is a technique proposed by the Initial Accounting for Internally Generated Intangible Assets Discussion Paper to account for internally generated intangibles?

a. hypothetical future value method

b. substituted fair value method

c. planned versus unplanned method

d.expected benefit method

Which of the following statements is incorrect?

a. The capitalisation of a leased asset increases the value of reported non-current assets and reduces the return on assets ratio.

b. Recognition of the present value of future lease payments as a liability increases reported current and non-current liabilities. This favourably affects debt-equity ratios and liquidity- solvency ratios.

c.Depreciation and interest expenses on finance leases may exceed rental payments and result in lower profits being reported in the early years of the lease.

d. More onerous disclosure requirements are prescribed for finance leases than for operating leases

Leases topic 4

Adam Limited and Davies Limited enter into a finance lease agreement with the following terms:

lease term is 3 years

estimated economic life of the leased asset is 6 years

3 annual rental payments of $23 000 each payment is one year in arrears

residual value at the end of the lease term is not guaranteed by the lessee

interest rate implicit in the lease is 7%

On inception date, the present value of the minimum lease payments is:

a.$60 359

b.$64 170

c.$64 584

d.$69 000

In relation to finance leases, the following information must be disclosed separately in the financial statements of lessors:

IUnearned finance income.

IIContingent rents recognised as income in the period.

III The unguaranteed residual values accruing to the benefit of the lessee.

IVThe accumulated allowance for uncollectible minimum lease payments receivable.

a.I, II and IV only

b.I, III and IV only

c.II, III and IV only

d.II and IV only.

-Under AASB 117 Leases, lessors are required to account for lease receipts from operating leases as:

a.revenue, on a reducing balance basis over the lease term

b.income, on inception date of the lease

c.income, on a straight-line basis over the lease term

d.revenue, at the end of the lease term.

2.Which of the following is not one of the situations provided in AASB 117 in relation to the classification of leases as finance leases?

a.Losses from the fluctuation of the fair value of the residual accrue to the lessee

b.Leased assets are of a specialised nature

c.The lessee has provided a guarantee that they will acquire the asset at the end of the lease term

d.The lease is for a major part of the economic life of the asset.

With respect to operating leases, lessors are required under AASB 117 Leases, to make the following disclosures:

ITotal contingent rents recognised as income in the period.

IIFuture minimum lease payments under individual, cancellable operating leases, separately.

IIIA general description of the lessee's leasing arrangements.

IVFuture minimum lease payments under non-cancellable operating leases in aggregate.

a.I, II and III only

b.I, III and IV only

c.II and III only

d.I, II and IV only.