Question

Identify whether each of the following would or would not be recorded as an intangible asset in the financial statement of Hummings as at the end of the reporting period of 30 June 2016 according to AASB 138 intangible assets.

Hummings has acquired copyrights for $240,000, The copyright (intangible)has a useful life of 50 years and over this time period is expected to generate future economic benefits well in excess of its cost of purchases.

                                                                                             

                                                                      

                                                                        

                                                                     

                                                                       

Hummings spent $600,000 over the past 5 years on the design and promotion of its brad. It is expected that such expenditure will provide significant economic benefits well in excess of the costs of promoting the brand.

                                                                                              

                                                                      

                                                                        

                                                                       

                                                                     

On 1 July 2015 Hummings acquired another company (XYZ Ltd). Goodwill of $35,000 has been recognized on the purchase.

Answer 1

The definition of an intangible asset requires an intangible asset to be identifiable to distinguish it from goodwill. Goodwill recognised in a business combination is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised. The future economic benefits may result from synergy between the identifiable assets acquired or from assets that, individually, do not qualify for recognition in the financial statements.

Copyright acquired for $240,000 is an intangible asset as it is identifiable and having future economic benefit. the cost of copyright is easily measurable as it is purchased.

As per para 63 & 64, Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance shall not be recognised as intangible assets. so the amount spent of brand promotion is not qualified to be an intangible asset.

the item acquired in a business combination and cannot be recognised as an intangible asset. If this is the case, it forms part of the amount recognised as goodwill at the acquisition date. AASB 138 is not applicable to Goodwill on business combination , AASB 3 is applicable in this case