Question
INTANGIBLES (IAS 28) & IMPAIRMENT OF ASSETS (IAS 36) PROBLEM 1 Apple Limited is a successful engineering business. Over the past number of years, the
INTANGIBLES (IAS 28) & IMPAIRMENT OF ASSETS (IAS 36)
PROBLEM 1
Apple Limited is a successful engineering business. Over the past number of years, the company has achieved a market share for its products of 30%. At a recent board meeting, the directors suggested recognizing an intangible asset for this market share.
A series of statements is provided below. Determine whether each statement is correct or not relevant to recognition of Intangible Assets. Write the word "TRUE" if the statement is correct, otherwise write "FALSE".
1.The market share does not have physical substance, is a result of past event and future economic benefits can be expected through sales made to customers.
2.There is little or no control over a market.
3.The market share is not separable from the business and does not arise from legal rights.
4.The market share qualifies for recognition as intangible asset.
PROBLEM 2
Mince Limited is a company manufacturing and retailing food product. The current financial year ends on December 31, 2016. The company owns one brand name, 'pie', shown in the balance sheet at its carrying amount of P300 000. The right to manufacture under this brand name for a period of 30 years was purchased on January 1, 2013 for P300 000. These rights may be renewed at a cost of PIO 000 (an immaterial cost to the company). The brand name is considered to have an indefinite useful life. Mince Limited intends not to calculate the recoverable amount of this brand at December 31, 2016 since a detailed calculation of the recoverable amount was done at the end of 2015 on which date there was an immaterial difference between the recoverable amount and carrying amount and there appears to be no indication of an impairment after having performed the indicator review.
Required:
1.Mince has made the correct decision of non-calculation of recoverable amount on December 31, 2016. (True or False?)
2.Carrying value of the intangible asset as of December 31, 2016.
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