Noupoort Energy Ltd $($Noupoort$)$ is a manufacturer and installer of wind turbines and related energy

generating equipment in South Africa. The company is situated in the Eastern Cape and has a

$31$ December year$-$end.

The following information relates to some of the assets and transactions of the company:

$1.$ Licence to manufacture

Noupoort acquired a licence to manufacture wind turbine rotator blades on $15$ August $2019$ at a cost of

R$2755850.$ The licence entitles Noupoort to be the only manufacturer and seller of wind turbine rotator

blades in South Africa for a period of $7$ years. On $1$ September $2019,$ Noupoort Energy received an

invoice for legal fees amounting to R$450000$ from ZKC Attorneys. Noupoort Energy made a special

arrangement with ZKC Attorneys to only pay the amount on $28$ February $2020.$ ZKC Attorneys$$ payment

terms are normally strictly $30$ days after invoice date. All legal contracts were signed and submitted, and

the licence was available for use as intended by management, on $1$ September $2019.$ The licence was

correctly classified as a purchased intangible asset and its residual value was considered to be zero.

During the $2022$ financial year, a decision was made by the minister of energy to grant similar licences

to manufacture to two other energy generating companies in South Africa to ensure better competition

in the renewable energy sector. As a result of the decision by the minister, Noupoort became one of the

three manufacturers and sellers of wind turbine rotator blades in South Africa on $31$ December $2022.$

The licence to manufacture was assessed to have a fair value less costs to sell and value in use,

correctly determined, of R$1400000$ and R$1458950,$ respectively. The remaining useful life of the

licence remained unchanged.

As part of the $31$ December $2023$ financial year$-$end procedures, the junior accountant prepared the

following intangible asset note and supporting calculations:

Purchased

Intangible

Assets

R

Carrying amount at the beginning of the year $1400000$

Cost $($calc $1)3205850$

Accumulated depreciation and impairment loss $($calc $2$ and $3)(1805850)$

Additions $-$

Depreciation $($included in other expenses$)($calc $4)(200000)$

Impairment loss $-$

Carrying amount at the end of the year $1200000$

Cost $3205850$

Accumulated depreciation and impairment loss $(2005850)$

The licence had a remaining useful life of $2$ years and $8$ months as at $31$ December $2023.$Write an email to the junior accountant of Noupoort Energy Ltd$,$ where you

discuss, with reference to IFRS, any concerns you have with the intangible asset

note as well as supporting calculations prepared for the year ended

$31$ December $2023.$

$$ Your discussion should be supported by relevant calculations where

necessary. Calculations will only be marked within the context of a

discussion.

$$ Ignore comparative information.

Communication mark: Presentation

Communication mark: Logical argument