McDonalds corporation is undoubtedly the largest chain of hamburger fast-food restaurants in the world. The restaurant serves more than 58 million customers every day. The operation of Mcdonalds is like a typical large chain that operates as a corporation, a franchise, or at times as an affiliate. It draws its revenues from various sources such as franchise fees, rent from its various property across the world and most sales from its company-operated restaurants. In the last three years, significant growth has been evident with the company registering a 27% growth.

McDonalds strengths lie in its intangible assets. Its Intangible assets include competitive intangibles which entail structural, associational and influential activities as well as legal intangibles that give the company exclusive rights. The legal intangible spawns legal property which can be defended in a court of law. The competitive intangibles are not legally owned but they have a direct impact on things like productivity, wastage, opportunity cost, and effectiveness of the organization.

McDonalds intangible assets give it an exclusive right to offer a particular service or to produce certain goods. For this reason, their value is obtained from the cash flows that a generated from the exclusive right. Mc Donalds, gets a lot of income from intangible assets as its a well-established brand. Some of its intangible assets have an infinite life because they are the only form of authenticity, and the value comes from extra returns that are associated with possessing this right.

Mcdonalds gives the right to offer a particular service or sell a product of its a brand-name. The person who gets the right is the franchisee. The franchisee usually pay upfront or in some instances annually to Mc Donalds for operating the business. The franchisees then get the privilege to use the brand name, benefit from advertising since advertising is aimed at marketing all branches regardless of whether they are franchises or not. They also get corporate support. They serve a given territory and run for a given time frame.

Only one of its intangible assets has been impaired in the last two years. The major effect of the impairment was indicated in the share price of the company as it dropped by 10 dollars, it was trading at $55 before the charge and the next day of trading, a share was going for $45. The companys share price dropped significantly below the book value of impairment which made investors be skeptical of the stock. This affected the capital structure to some extent thus affecting the income statement

Required:

(a) Identify three intangible asset that the case study talks about

(b) Which Intangible asset can only arise from acquisition?

(c) Which intangible asset can only be impaired but not amortized

(d) Which intangible assets can be amortized

(e) Which intangible asset is not recognised in Canada