Intangibles Accounting | Test Bank - 9e

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Chapter 08 Testbank

1. AASB 3 defines a business combination as ‘a transaction or other event in which an acquirer obtains control of one or more businesses’.

True   False

2. While the intangible asset standard will promote a new level of international consistency in financial reporting, it is seriously flawed and an archly conservative standard. It fails to require recognition of many intangible assets and places a number of severe restrictions on the recognition of internally generated intangible assets and on revaluation of those assets.

True   False

3. An asset can be considered as identifiable:

A. if it is either separable or arises from contractual or other legal rights

B. if it is either acquired or is internally generated

C. if it is carried at cost

D. if it has an active market

4. Examples of intangible assets include:

A. loyal customers

B. patents

C. trademarks

D. All of the given answers are correct.

5. Which statement is correct regarding the treatment of research costs in accordance with AASB 138?

A. Research costs can be deferred (recorded as an asset) when it is probable that the project they are applied to will bring future economic benefits.

B. Research costs may not be deferred unless it is almost certain that the project they are applied to will bring future economic benefits and costs can be measured reliably.

C. Research costs may not be recorded as an intangible asset and thus the cost is expensed in the period it is incurred.

D. Research costs may be deferred if costs can be measured reliably.

6. Which of the following statements is correct with respect to research and development expenditures in accordance with AASB 138?

A. Activities aimed at obtaining knowledge that are likely to produce a viable commercial product can be capitalised.

B. Amounts incurred for investigation of alternative viable projects can be capitalised.

C. Design, construction and operation of a pilot plant that is not of a scale economically feasible for commercial production can be capitalised.

D. The search for, evaluation and final selection of applications of research findings and other knowledge can be capitalised.

7. The requirement of AASB 138 in relation to the amortisation of an intangible asset with a finite useful life is that:

A. it is to be amortised straight-line over a period not greater than 20 years

B. it is to be amortised from the time the asset is held for sale till the asset is derecognised

C. it is to be amortised at a reducing rate over a period not exceeding 10 years

D. it is to be amortised from the time the asset is available for use and shall reflect the consumption of the economic benefits by the entity

8. AASB 138 describes the distinction between the treatment of internally generated goodwill and purchased goodwill as arising because:

A. the two different sources of goodwill result in two different types of asset

B. internally generated goodwill cannot generate future economic benefits

C. internally generated goodwill cannot be reliably measured

D. recording purchased goodwill could lead to the manipulation of profit and asset amounts

9. What is the difference in the treatment of internally generated goodwill from the purchased goodwill under AASB 138?

A. Purchased goodwill is not amortised; whereas, internally generated goodwill can be amortised over a period of 10 years.

B. Purchased goodwill may be recorded as an asset, whereas internally generated goodwill may not.

C. Purchased goodwill can be amortised over a period of 10 years; whereas, internally generated goodwill is recognised as an asset which cannot be amortised.

D. Purchased goodwill is to be expensed in the period it is bought, whereas internally generated goodwill is to be deferred and amortised over a period of no less than 20 years.

10. Purchased goodwill is recognised as the amount of:

A. the excess of the cost of acquisition incurred by an acquirer over the fair value of the identifiable net assets acquired

B. the difference between fair value and book value of the net assets of the company acquired

C. the lower of the sum of related expenditures on advertising and promotion undertaken in the past two years by the subsidiary being purchased and the independent valuation of the market value of that subsidiary's goodwill

D. the excess of the cost of acquisition incurred by an acquirer over the fair value of the identifiable net assets and contingent liabilities acquired

11. An intangible asset with a finite useful life can be amortised when:

A. the asset has been purchased

B. the asset is available for use

C. the asset is derecognised

D. None of the given answers are correct.

12. The AASB has followed ____________________.

A. the International Financial Reporting Standard

B. the International Auditing Standards

C. no standards

D. US accounting standards

13. Which among the following is an intangible asset?

A. property

B. brand name

C. plant

D. equipment

14. Expenditure on internally generated brands, mastheads, publishing titles, customer lists and items similar in substance cannot be distinguished from the cost of developing the business as a whole. Therefore, such items are not recognised as___________ as per AASB 138.

A. tangible assets

B. intangible assets

C. expense

D. cost

15. As per AASB 138, expenditure on research shall be recognised as an ___________when it is incurred.

A. expense

B. income

C. investment

D. None of the given answers are correct.

16. An infinite life would imply that the asset was expected to last ____________.

A. 10 years

B. 20 years

C. 50 years

D. forever

17. The term _________ means that the organisation could rent, sell, exchange or distribute the specific future economic benefits attributable to the asset without also disposing of future economic benefits that flow from other assets used in the same revenue-earning activity.

A. separable

B. identifiable

C. tangible

D. amortisable

18. The price that would be received to sell an asset or paid to transfer a liability in an orderly sale between market participants at the measurement date is termed ________.

A. tangible value

B. intangible value

C. book value

D. fair value

19. The _______________ of the asset is defined in the accounting standard as: ‘The amount at which an asset is recognised in the statement of financial position after deducting any accumulated amortisation and accumulated impairment losses therefrom’.

A. fair value

B. carrying amount

C. historical value

D. residual value

20. Which among the following is not an intangible asset?

A. plant

B. brand name

C. patents

D. copyrights

21. Computer software is an example of a(n) ____________ asset.

A. intangible

B. tangible

C. current

D. None of the answers given are correct.

22. ___________ is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services prior to the commencement of commercial production or use.

A. investigation

B. development

C. production

D. planning

23. Consistent with the recognition requirements in many other accounting standards, a(n)____________must be recognised when it is probable that the future economic benefits that are attributable to the asset will flow to the entity and the cost of the asset can be measured reliably.

A. intangible asset

B. tangible asset

C. liabilities

D. cash flows

24. Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance shall not be recognised as_________________. (AASB 138)

A. intangible assets

B. tangible assets

C. goodwill

D. None of the given answers are correct.

25. While the intangible asset standard will promote a new level of international consistency in financial reporting, it is seriously ______and an archly conservative standard. It fails to require recognition of many intangible assets.

A. unrealistic

B. confusing

C. flawed

D. incomplete

26. Explain how AASB 138 Intangible Assets affects those Australian companies that have heavy research and development activities. Contrast this with US companies.

______________________________________________________________________________

27. Explain why research expenditures and expenditures on internally generated assets such as brands, mastheads and publishing titles are not capitalised regardless of whether they are likely to generate future economic benefits.

______________________________________________________________________________

28. Discuss the concerns held by Australian corporate executives on the indefinite lives of intangibles prior to Australia's 2005 adoption of IFRS.

______________________________________________________________________________

29. Explain the concept of ‘goodwill’ and the different treatments of both purchased goodwill and internally generated goodwill

______________________________________________________________________________

30. Why is there a need to know how intangible assets are measured for financial reporting purposes?

______________________________________________________________________________

31. Define fair value as per AASB 13.

______________________________________________________________________________

32. What is the requirement of revaluation of intangibles as per AASB 138?

______________________________________________________________________________

33. Discuss briefly the carrying amount of the asset.

______________________________________________________________________________

34. List any four examples of intangible assets.

______________________________________________________________________________

35. Does the way in which intangible assets are accounted for provide useful financial accounting information?

______________________________________________________________________________

36. What is meant by an active market?

______________________________________________________________________________

37. What is meant by business combinations?

______________________________________________________________________________

38. List any two required disclosures in relation to intangible assets as per AASB 138.

______________________________________________________________________________

Chapter 08 Testbank