iv) Following the financial managers request, you need to explain the criteria that need to be satisfied before expenditure can be recognised in the balance sheet as intangible assets. Also, explain how the criteria is applied to the recognition of separately purchased intangible assets, intangible assets acquired in a business combination and internally generated intangible assets. In your discussion, you are required to discuss IAS 38.

(8 Marks)

v) The Hull plc decides to adopt straight-line depreciation on production equipment. The straight-line depreciation is charged in periods of operation, but if the production equipment is not in active use then no depreciation is charged. The financial managers of Hull plc justify this on the grounds that the economic benefits of the inactive production equipment are not being consumed. Some equipment can remain inactive for many years, although money is spent maintaining them during these periods. The financial manager requires advice as to whether this depreciation policy is in accordance with IAS 16 Property, Plant and Equipment.

(8 Marks)

[Maximum 700 words]