In: Accounting
(a)Describe intangible assets? Give THREE (3) examples of intangible assets.
(b)How is the cost of the intangible assets be determined if it is acquired by issuance of shares.
(c)Identify THREE (3) typical costs included in the cash purchase of an intangible asset.
(d)Assuming that MCO Bhd acquires the customer list of a social media for RM8,000,000. The company expects to benefit from the information evenly over a four-year period. REQUIRED: Explain the accounting treatment for the customer list acquired by MCO Bhd in accordance with MFRS 138 Intangible Assets.
(e)Based on MFRS 138 Intangible Assets, state TWO (2) criteria that an entity must meet in order for the development costs (e.g. construction of prototypes) to be capitalised?
ans a Intangible assets are the assets that cannot be touched i.e these assets do not have physical presence and they increase the value of the buisness. These are long term assets and are amortized during its useful life. It is difficult to know the exact cost of these assets. Examples are patent, trademarks, copyrights , goodwill, customer list etc. Unlike other intangible assets goodwill has infinite life, other assets have finite life |
ans b If intangible assets are acquired against issue of shares the cost is determined by multiplying no. of shares issued X market price price i.e if the shares would have sold in the market the proceeds which we would have got becomes the cost of intangible assets |
ans c Three cost that can be included are: |
1) Acqusition price paid to the seller for the intangile asset. If the asset is acquired from againisg issue of shares its market value inlcuded. |
2) Subsequent expenditure made to use the asset for a period of time |
3) Cost incurred apart from acquisition to use the asset for the company |
4) Legal fees, court fees etc paid to use the assets |
Intangible assets acquired in merger and acquisition there cost will also be included. |
ans d |
The cost of RM8000000 will be amortized in span of four years with RM 2000000 will be amortized every year. |
ans e Criterio for development cost to be capitalized: |
1) If it is probable that a new function would be added, of the value of the firem increase through incurring development cost than it could be capitalized. |
If any doubt please comment |