Intangible Assets (IAS 38)

Conceptual

1. Which of the following is an objective of IAS 38?

a. To prescribe the accounting treatment for intangible assets that are dealt with specifically in another
Standard
b. To specify how to measure the fair value of intangible assets
c. To specify disclosure requirements about intangible assets
d. All of the above

2. Which of the following shall IAS 38 be applied to?

a. Financial assets
b. The recognition and measurement of exploration and evaluation assets
c. Expenditure on the development and extraction of minerals, oil, natural gas and similar non-
regenerative resources
d. All of the above
e. None of the above

3. Which of the following is an example for application of IAS 38?

a. Deferred tax assets
b. Expenditure on advertising
c. Assets arising from employee benefits
d. Goodwill acquired in a business combination
e. All of the above
f. None of the above

4. Which of the following shall be excluded from the scope of IFRS 16 Leases and shall be accounted in accordance
with IAS 38?
a. Motion picture films
b. Patents and copyrights
c. Manuscripts
d. All of the above
e. None of the above

5. If an asset incorporates both intangible and tangible elements, it shall be treated under __________.
a. IAS 16 Property, Plant and Equipment
b. IAS 38 Intangible Assets
c. A or B, depending which element is more significant
d. A and B

6. Which of the following does not define an “asset”?

a. A resource that is controlled by an entity as a result of past events
b. A resource which value in use exceeds its historical cost
c. A resource from which future economic benefits are expected to flow to the entity
d. All of the above
e. None of the above

7. Carrying amount is the amount at which an asset is recognised in the statement of financial position before
deducting any accumulated amortisation and accumulated impairment losses thereon.
a. True
b. False

8. Amortisation is the systematic allocation of the depreciable amount of an intangible asset over its __________.
a. Deemed cost
b. Useful life
c. Carrying amount
d. Value in use

9. Which of the following does define “depreciable amount’”?

 a. The cost of an asset, or other amount substituted for cost, less its value in use
b. The cost of an asset, or other amount substituted for cost, plus its value in use
c. The cost of an asset, or other amount substituted for cost, less its residual value
d. The cost of an asset, or other amount substituted for cost, plus its residual value

10. Which of the following does this statement define: “Present value of the cash flows an entity expects to arise
from the continuing use of an asset and from its disposal at the end of its useful life or expects to incur when
settling a liability”?
a. Fair value
b. Residual value
c. Recoverable amount
d. Entity-specific value

11. The definition of an intangible asset requires an intangible asset to be identifiable to distinguish it from
goodwill.
a. True
b. False

12. According to IAS 38, under which of the following circumstances is an asset identifiable?
a. If an asset is capable of being separated or divided from the entity and sold, transferred, licensed,
rented or exchanged, either individually or together with a related contract, identifiable asset or
liability, regardless of whether the entity intends to do so
b. If an asset arises from contractual or other legal rights, regardless of whether those rights are
transferable or separable from the entity or from other rights and obligations
c. A and B
d. A or B

13. An entity usually has sufficient control over the expected future economic benefits arising from a team of
skilled staff and from training for these items to meet the definition of an intangible asset.
a. True
b. False

14. Which of the following shall be met in order to recognise an item as an intangible asset?
a. The definition of an intangible asset
b. The amortisation criteria
c. The recognition criteria
d. A and B
e. A and C

15. Subsequent expenditure—expenditure incurred after the initial recognition of an acquired intangible asset or
after completion of an internally generated intangible asset— are usually recognised in the carrying amount
of this intangible asset.
a. True
b. False

16. Under which of the following circumstances shall an intangible asset be recognised?
a. If it is probable that the expected future economic benefits that are attributable to the asset will flow
to the entity
b. If the cost of the asset can be measured reliably
c. If the useful life of the asset can be estimated reliably
d. All of the above
e. A and B

17. An entity shall assess the probability of expected future economic benefits using reasonable and supportable
assumptions that represent management’s best estimate of the set of economic conditions that will exist over
the useful life of the asset.
a. True
b. False
18. An intangible asset shall be measured initially __________.
a. At cost
b. At fair value
c. At present value
d. At amortised cost

19. What does the cost of separately acquired intangible asset comprise?
a. Its purchase price, excluding import duties and non-refundable purchase taxes, after deducting trade
discounts and rebates
b. Its purchase price, excluding import duties and non-refundable purchase taxes, before deducting trade
discounts and rebates
c. Its purchase price, including import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates
d. Its purchase price, including import duties and non-refundable purchase taxes, before deducting trade
discounts and rebates

20. Which of the following is an example of directly attributable costs?

a. Costs 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. Costs of introducing a new product or service
d. A and B
e. All of the above

21. Which of the following is an example of expenditures that are not part of the cost of an intangible asset?
a. Costs of testing whether the asset is functioning properly
b. Costs of conducting business in a new location or with a new class of customer
c. Administration and other general overhead costs
d. A and B
e. B and C

22. In accordance with IFRS 3 Business Combinations, if an intangible asset is acquired in a business
combination, the cost of that intangible asset is its __________ at the acquisition date.
a. Carrying amount
b. Fair value
c. Nominal amount
d. Present value

23. In which of the following phases does the entity classify the generation of the asset in order to assess whether
an internally generated intangible asset meets the criteria for recognition?
a. A research phase
b. A testing phase
c. A development phase
d. A and C
e. All of the above

24. Which of the following is an example of research activities?

a. The design, construction and testing of pre-production or pre-use prototypes and models
b. The design of tools, jigs, moulds and dies involving new technology
c. The formulation, design, evaluation and final selection of possible alternatives for new or
improved materials, devices, products, processes, systems or services
d. All of the above

25. What shall an entity demonstrate in order to recognise an intangible asset arising from development?
a. Its intention, ability and the technical feasibility of completing the intangible asset so that it will be
available for use or sale
b. How the intangible asset will generate probable future economic benefits
c. Its ability to measure reliably the expenditure attributable to the intangible asset during its
development
d. B and C
 e. All of the above

26. To demonstrate how an intangible asset will generate probable future economic benefits, an entity assesses
the future economic benefits to be received from the asset using the principles in IAS 36 Impairment of Assets.
a. True
b. False

27. Which of the following will more likely result in development of an intangible asset?
a. Design of a pilot plant
b. Internally generated brands
c. Customer lists
d. Publishing titles

28. On July 1 20X6 an entity Z established a new research and development unit to automate assembly line for
chocolate bars packing. The following expenses were incurred during the year ended 30 June 20X6:
• Purchase of building for $500,000. The building is to be depreciated on a straight-line basis for 25 years
• Wages and salaries of research staff are $350,000
• Assembly line costing $84,000 is to be depreciated using a reducing balance rate of 50% per annum.
What amount of research and development expenditures shall an entity Z recognise as an expense in the year
ended 30 June 20X6?
a. $350,000
b. $412,000
c. $584,000
d. $934,000

29. An entity X acquired the exclusive rights on 1 March. The amount payable for the rights was $150,000
immediately and $50,000 in one year’s time. Entity’s X cost of capital is 10%.
What is the cost of the patent rights on initial recognition?
a. $150,000
b. $186,364
c. $195,455
d. $200,000