Question
You are asked to review the draft financial statements for the year ended 30 April 2022 of Lord plc. The company has a subsidiary company
You are asked to review the draft financial statements for the year ended 30 April 2022 of Lord plc. The company has a subsidiary company which runs bus routes in Brighton. In order to do this it has purchased licences which give the company the right to operate certain routes on an exclusive basis. These licenses which have been granted by the government, cost 2,000,000, will last for four years and are not transferable. The company accountant has capitalised the whole 2,000,000 and intends writing off the cost on a reducing balance basis over the four-year period.
Required: Comment on the current treatment in the financial statements and advise the company if any changes need to be made.
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