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Intangible Asset

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Based on Week 4 Due Week 5 (due 25th March) NOTE: Provide references for your answers and quote where you have written something that is word-for-word from a source Textbook Questions (15 marks): Challenging Question 29 (5 marks) Inglis Ltd has a number of taxi licences that are shown in the financial statements at cost. Can these licences be revalued to fair value and, if so, do they also need to be subject to periodic amortisation? Yes, if these taxi licenses are freely transferable, they can be revalued to fair value.

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The requirements of AASB 138 state that intangible assets may be revalued only if there is an ‘active market’. Most of intangible assets will not be able to be revalued as there is no active market for them given that most intangible assets are unique in nature, i. e. brands, masthead, copyright, patent or trademark. However, as paragraph 78 of AASB 138 states that in some jurisdiction, an active market may exist for freely transferable taxi licences, fishing licences or production quotas (Financial Accounting, 2011, pg256).

Yes, they also need to be subject to periodic amortisation.

Intangible assets that are considered to have a limited useful life are required to be amortised over their useful lives. The useful life of an intangible asset is defined at paragraph 8 of AASB 138 as the period of time over which the asset is expected to be used by the entity, or the numbers of production or similar units expected to be obtained from the asset by the entity (Financial Accounting, 2011, pg256). The taxi licences are limited to a fixed-term which meet the requirement of AASB 138. Therefore, taxi licences will be amortised over the useful life.

Challenging Question 32 (10 marks) Critical Thinking Question (10 marks): The following is an excerpt from an article entitled “The Power of Brands” by Emily Chantiri and Kate Mills (Business Review Weekly, July 7 – 13, 2011, p. 16): Surf and sports label Billabong has the “hardest working brand” in Australia, according to a new report on the value of brands by consultancy and research outfit Brand Finance. The consultancy measures the value of intangible assets that are not recorded on the balance sheet and looks at how much of this value comes from the brands owned by companies.

With regards to how hard they are working for the company, it looks at how much the brand contributes to the enterprise value – or the total value including market capitalisation and debt capital – of an organisation. In the case of Billabong, the survey states that for each dollar of cash flow, 42c comes from the strength of the brand. “The Billabong brand is playing a bigger role in generating enterprise value than other brands in the study,” says Tim Heberden, managing director of Brand Finance. This is partly due to the apparel sector being more brand-centric than, say, financial services, but also due to the consumer appeal of Billabong”. Heberden also credits the surf and sports label for managing the brand well and building it up over a number of years. “They have built it up in consumer minds so that it is influencing the frequency that consumers choose Billabong and the amount that they pay,” he says. Required: A Billabong shareholder read this article and has asked you to explain why the value of the brand is not included on Billabong’s Balance Sheet. You are required to: 1) Identify the requirements of both AASB 138 and the AASB Framework in relation to accounting for brands; (2) Provide a response to the shareholder on the basis of these requirements. In your answer, respond to the article and refer also to the AASB Framework and the requirements of AASB 138. Structure your answer according to the AREA framework: ANALYSE (50 words maximum) Identify the issue and why it matters; determine what you need to find out The issue is why the value of the brand is not included on Billabong’s Balance Sheet. Surf and sports label Billabong has the “hardest working brand” in Australia.

But the brand value as intangible assets is not recorded in Balance Sheet. I need find out the what is intangible assets, the presentation of Financial Statement and the RESEARCH and EVALUATE (500 words maximum) Gather relevant facts and evidence, sort all evidence, identify themes or issues, develop a data scaffold AND Sort all evidence and weigh it up to start building a picture of what your Answer might be ANSWER (50 words maximum) Your opinion of the themes or issues you have identified, justified by the evidence you have gathered and evaluated

Total marks for Week 5 Tutorial work: 25 (will be scaled back to 5% if marked) Critical Thinking Questions Assessment Criteria| | Question 1| Identify the requirements of both AASB 138 and the AASB Framework in relation to accounting for brands| | | High distinction (4. 5 – 5 marks) | Distinction (4 marks) | Credit (3 – 3. 5 marks) | Pass (2. 5 marks) | Unsatisfactory ( 1 – 2marks)| Mark| | The answer thoroughly and accurately portrays the accounting treatment of internally generated intangible assets, referring appropriately to the media article, AASB 138 and the AASB Framework. The answer provides a good amount of correct information about the accounting treatment of internally generated intangible assets, making some reference to the media article, AASB 138 and the AASB Framework. | The answer provides some correct information about the accounting treatment of internally generated intangible assets, with adequate reference to the media article, AASB 138 and the AASB Framework. | The answer provides little accurate information about the accounting treatment of internally generated intangible assets, with limited reference to the media article, AASB 138 and the AASB Framework. The answer does not provide sufficient information about the accounting treatment of internally generated intangible assets, with little or no reference to the media article, AASB 138 and the AASB Framework. | /5 | Question 2| Provide a response to the shareholder on the basis of these requirements| | | High distinction (4. 5 – 5 marks) | Distinction (4 marks) | Credit (3 – 3. marks) | Pass (2. 5 marks) | Unsatisfactory ( 1 – 2marks)| | | The answer clearly identifies the reasons for the required treatment of brands. It uses the AREA Framework accurately, and based on the content of the article, it provides a concise, detailed and justified opinion. | The answer identifies some of the reasons for the required treatment of brands. Using the AREA Framework and based on the content of the article, it provides a fairly well justified opinion. The answer identifies some of the reasons for the required treatment of brands. It partly uses the AREA Framework to provide an opinion. | The answer provides little explanation of the reasons for the requirement treatment of brands, and only partially uses the AREA Framework. | The answer provides insufficient information about the reasons for the required treatment of brands, and does not use the AREA Framework to provide this opinion. | /5 | | | | | | | /10|

Cite this Intangible Asset

Intangible Asset. (2016, Oct 13). Retrieved from https://graduateway.com/intangible-asset/

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