Question

In: Accounting

Topic: Intangible Assets Which of the following statements is incorrect regarding the recognition of intangible assets in a business combination

11. Topic: Intangible Assets Which of the following statements is incorrect regarding the recognition of intangible assets in a business combination:

a. Intangible assets arising from contractual or legal rights are recognized separately from goodwill
b. Intangibles that can be separated from the business and sold, rented or licensed are recognized separately from goodwill
c. Separately recognized intangibles are identified as either limited life or indefinite life intangibles
d. The acquirer in a business combination does not recognize intangible assets unless they appear on the investee company's balance sheet

12. Topic: Goodwill impairment When a company assigns goodwill to a reporting unit acquired in a business combination, it must:
a. Record an impairment loss if the fair value of the net identifiable assets held by a reporting unit decreases.
b. Record an impairment loss if the fair value of the reporting unit decreases.
c. Record an impairment loss if the carrying value of the reporting unit is less than the fair value of the reporting unit.
d. Record an impairment loss if the fair value of the reporting unit is less than its carrying value and the carrying value of goodwill is more than the implied value of its goodwill.


Solutions

Expert Solution

11.

Answer: d

Intangible assets arising from any contractual or legal rights should be presented separately in the face of the financial statement. Intangibles that can be separated from the business and sold, rented or licensed are recognized separately from goodwill. These intagible assets can have either definite or indefinite useful life. The acquirer may show intangible assets in the statement even if it is not shown in the financial statement of investee; for example, goodwill, customer base etc.

12. Answer: d

Impairment is recorded when the carrying of a reporting unit is more than the fair value of the total reporting unit.

Fair value alone decreasing cannot make sure that there is impairment. It should be cross checked with the carrying value


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