Chapter 11

Chapter 11 - Solutions to Gripping IFRS : Graded Questions...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Solutions to Gripping IFRS : Graded Questions Intangible assets Chapter 11: Page 1 Solution 11.1 Part A An intangible asset is an identifiable non-monetary asset without physical substance. An asset is: a resource, controlled by the entity, as a result of a past event, from which future economic benefits are expected to flow. The market share does not have physical substance and is non-monetary and thus the issue is whether the market share is identifiable. An asset meets the identifiability criterion in the definition of an intangible asset when it Is separable, or Arises from contractual or other legal rights (IAS 38, p12) The market share is not separable from the business as a whole and it does not arise from legal rights. The market is a resource in that it generates sales for the company. The event was the creation of the customer loyalty that constitutes the market share (perhaps through entertainment, advertising etc). This event is a past event if the creation occurred before year-end. Future economic benefits can be expected from the market through sales made to customers that form part of the market. There is, however, little or no control over a market since a company’s market can be easily usurped by another company offering better products, service, advertising etc. Therefore, the market share should not be recognised as an intangible asset (not identifiable and not controllable). Part B An intangible asset is an identifiable non-monetary asset without physical substance. An asset is: a resource, controlled by the entity, as a result of a past event, from which future economic benefits are expected to flow. The patent and the staff skills are identifiable (sold, leased or rented out separately and/ or are identifiable through legal rights: registered patent). (IAS 38, p15) Both the patent and staff skills are non-monetary and do not have physical substance. Thus the issue is whether or not they meet the definition of an asset. The patent and staff skills are a resource in that they can be used to generate sales of software and services provided by their staff.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Solutions to Gripping IFRS : Graded Questions Intangible assets Chapter 11: Page 2 Solution 11.1 continued … Part B continued … The past event would be the hiring of staff and creating the patented software prior to the year-end. The future economic benefits would be expected through the sale of the software and services offered by its staff. An entity controls an asset (and therefore, an intangible asset) if it: Has the power to obtain future economic benefits from the item and Is able to restrict the access of others to those benefits (IAS 38, p13) The company controls the future benefits from the software and the knowledge is protected by the legal rights of the patent.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/19/2012 for the course ACCT 100 taught by Professor Ayeshab during the Spring '12 term at Alvin CC.

Page1 / 20

Chapter 11 - Solutions to Gripping IFRS : Graded Questions...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online