Final Lecture 2
ASSIGNMENT ANSWER KEY
Scope
1. PAS 38 shall be applied in accounting for intangible assets, except
a. intangible assets that are within the scope of another Standard
b. financial assets, as defined in PAS 39
c. mineral rights and expenditure on the exploration for, or development and extraction of, minerals, oil, natural gas
and similar non-regenerative resources.
d. all of the above
a
Definition
2. An
a.
b.
c.
d.
intangible asset is (choose the incorrect one)
An identifiable nonmonetary asset without physical substance.
A resource controlled by an entity as a result of past event.
A resource from which future economic benefits are expected to flow to the entity.
Held for use in the production or supply of goods or services, for rental to others, or for administrative purposes.
d
3. Which is correct concerning the criterion of identifiability of an intangible asset?
I. An intangible asset is identifiable when it is separable, meaning, the asset could be sold, transferred, licensed,
rented or exchange.
II. An intangible asset is identifiable when it arises from contractual or legal right.
a. I only
c. Both I and II
b. II only
d. Neither I nor II
c
4. A trademark is an example of which general category of intangible asset?
a. Market-related
c. Artistic-related
b. Customer-related
d. Contract-based
a
5. A copyright is an example of which general category of intangible asset?
a. Market-related
c. Artistic-related
b. Customer-related
d. Contract-based
c
6. Broadcast rights and franchises are an example of which general category of intangible asset?
a. Market-related
c. Artistic-related
b. Customer-related
d. Contract-based
d
7. Order backlogs and customer list are example of which general category of intangible asset?
a. Market-related
c. Artistic-related
b. Customer-related
d. Contract-based
b
8. Trade secrets and patents are an example of which general category of intangible asset?
a. Market-related
c. Artistic-related
b. Customer-related
d. Technology-based
d
Recognition
9. The recognition criteria for an intangible asset include which of the following conditions?
I. It must be measured at cost.
II. Its cost can be measured reliably.
III. It is probable that future economic benefits will arise from its use.
a. I, II and III
c. I and III only
b. I and II only
d. II and III only
a
Measurement
10. Directly attributable costs of preparing the intangible asset for its intended use include all of the following, except
a. Cost of employee benefits arising directly from bringing the asset to its working condition
b. Professional fees arising directly from bringing the asset to its working condition
c. Cost of testing whether the asset is functioning properly
d. Initial operating losses
d
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11. Which is incorrect concerning separate acquisition of an intangible asset?
a. If an intangible asset is acquired separately, the cost of the intangible asset can usually be measured reliably.
b. The cost of an intangible asset comprises its purchase price and any directly attributable expenditure on preparing
the asset for its intended use.
c. If payment for an intangible asset is deferred beyond normal credit terms, its cost is equal to the cash price
equivalent.
d. The cost of an intangible asset includes initial operating losses.
a
12. Once recognized, intangible assets can be carried at
a. Cost less accumulated amortization
b. Cost less accumulated amortization and impairment losses
c. Revalued amount less accumulated amortization
d. Cost plus a notional increase in fair value since the intangible asset is acquired
b
13. A patent should be amortized over
a. twenty years.
b. its useful life.
c. its useful life or twenty years, whichever is longer.
d. its useful life or twenty years, whichever is shorter
D
14. A purchased patent with a remaining life of 15 years should be
a. Expensed in the year of acquisition.
b. Amortized over 15 years regardless of the useful life.
c. Amortized over its useful life if less than 15 years.
d. Amortized over 20 years.
C
15. Copyrights should be amortized over
a. their legal life.
b. the life of the creator plus fifty years.
c. twenty years.
d. their useful life or legal life, whichever is shorter.
D
16. The intangible asset goodwill may be
a. capitalized only when purchased.
b. capitalized either when purchased or created internally.
c. capitalized only when created internally.
d. written off directly to retained earnings.
A
17. Research is
I. Original and planned investigation undertaken with the prospect of gaining scientific or technical knowledge.
II. Application of research finding or other knowledge to a plan or design for the production of a new product prior to
commencement of commercial production.
a. I only
c. Both I and II
b. II only
d. Neither I nor II
a
18. Are the following statements true or false?
I. Expenditure during the research phase of a project may sometimes be capitalized as an intangible asset.
II. Expenditure during the development phase of a project may sometimes be capitalized as an intangible asset.
I
II
a. False
False
b. False
True
c. True
False
d. True
True
B
19. According to PAS 38 Intangibles, in order to be able to capitalize ‘development’ outlays an entity must be able to
demonstrate the following:
I. Technical feasibility and intention of completing the asset so it will be available for use or sale.
II. Its ability to reliably measure the expenditure on the development of the asset.
III. Ability to use or sell the asset.
IV. How the asset will generate probable future economic benefits.
a.
I, II and IV only;
c. I, II, III and IV;
b.
II, and IV only;
d. II, III and IV only.
B
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Assignment on PAS 38
20. Which of the following research and development related costs should be capitalized and depreciated over current and
future periods?
a. Research and development general laboratory building which can be put to alternative uses in the future
b. Inventory used for a specific research project
c. Administrative salaries allocated to research and development
d. Research findings purchased from another company to aid a particular research project currently in process
a
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Assignment on PAS 38