CHAPTER 36 INTANGIBLE ASSETS Goodwill TECHNICAL KNOWLEDGE To know the criteria in defining an intangible asset To know the initial and subsequent measurement of an intangible asset. ‘To understand amortization and impairment of intangible ‘sees . To understand the nature 43 an int aac of goodwill tangible To know the residual approach of measuring goodwill. To know the direct approach of measuring goodwill 876 Definition PAS 88, paragraph, re identifablenonmeccineY Sines on intangible asset a8 on identi ronment i Paragraph 8 furry be controlled bythe en Mihich future eonome entity” es thi “the intangible asset must ity result of past event and from ‘eneits are expected to flow to the Sirona everin Sona © I am ae Identfaiiy it clearly from goodwill. With nonphysical items, there may be # pee! identifiability. em with ‘An asset is identifiable when a. Iti separ ‘This means that the ane is capable of being separated from the entity and sold ranaerred, licensed, rented exchanged, ether individually or together with a elated asset or lability bt arises from contractual or other legal rights sin cogadlen of whether these rights are This ig ttrdleble fom the eats oe fom ether tran righta and ertaa Control other element in the definition of an intangible asset i AnotheT gust be under the control of the entity @8 result of ‘a past event.” Control ia the power of the entity to obtain the future GGhomic benefits flowing from the intangible asset and Sestrit the access of others to those benefits. In other words, the entity must be able (0 enjoy the future ‘cconomie benefits from the asset and prevent others from ‘enjoying the same benefits. ‘The capacity of an entity to control the future economic tenefits from an intangible asset normally would stem from legal rights that are enforceable in a court of lav. ‘The capacity to control future economic benefits is much pronounced in the case of trademark, copyright and patent In the absence of legal rights, it is more difficult to demonstrate control. owe pees arian avn ancy condition for contre since an entity may beable vo cnt ci For example, one method of contrl is i eben contr ishing omathing art ‘The skill of employees, arising out of the benefits of trainir Sesh nt ete eee cmbicmasmeatoy Simul, marketshare ond customer loa customer lay cannot nor belreognised e intangible asst becaee an ety cant ‘control the actions of the customers, * Customers Gustomersconnot be forced to buy from the entity and con #0 878 ‘Future economic benefits Future economic benef may ince ruenue fom the sale of ucts OF REFS, can cree ue af tae et ther bene renting For example, the we of intelectual soperty in a production process or the legal night owe snow chogs, may reduce Future production cons rather than crease fare FE Recognition of an intangible asset ‘An intangible asset shall be recognized if the following conditions are present: fa. It is probable that fture eonemic benefits attributable to the asset wil ow tothe entry bb. ‘The cost ofthe mange asset can be measured rebably Gualgment is unsaly exerosed in ssesing the degree of certavnty of the future economic beneie ‘The judgment i bated on exernal eden Initial measurement of intangible asset PAS 38, paragraph 2, pronice than intangible ase shall ‘be measured initial’ of allowing ste cost of an itange amet depends om the £ Separate wots part of business cmbynation sso “ ‘rquston fay ofa gene ‘Sequisition by = tion Acuiton fe neal eer a9 pawn wrt wlSeparate acquisition Ian intangible asset is acquired separately, the cost ofthe intangible asset can be measured reliably, particularly sey the purchase consideration is in the form of cash or othg! monetary aseets, The cost ofa separately acquired intangible asset comprian, a. Purchase price b, Import duties and nonrefundable purchase taxes ©. Direetly attributable costs of preparing the asset for the intended use Directly attributable costs include the following: % Costs of employee benefits arising directly from bringing the asset to its working condition. 5 Profesional fes arising directly from bringing the a to its working condition. ene me © Costs of testing whether the set is Functioning properly. Costs which are not capitalizable Examples of cota that are not included inthe co Intangible aeet but expensed immediately wer? °° ‘Acquisition by government grant ‘An intangible aset may be aoquzed by way of a government ‘grant, free of charge o for seminal consideration. ‘This may cccur when a pernmen transfers o allocates to an entity intangible assets such ax ‘a. Airport land rights Bb. Licenses to operate radio or telson stations ce. Import licenses or quctas or nights to access restricted ‘The intangible aset acquired by way of government grant may be initially recorded at ether: a, Fair value tb. Nominal amount or er, plus any expenditure tha ig directly attributable to preparing the asset for Acquisition by exchange ine at fair value of ‘The cost of the intangible asset is measured at f i eh pen nes the exchange ca eee cereal nae action lacks commercial substance, the If the exchange transis se he carrying amount of the asset intangible anet is mensue tt Soa el mtn tn cin ck commercial substance when ‘An exchange wane ot ceed do not ler siynuicants the cash flows pe ofthe ase nae ee from the cash7 L -DARTONE NUR, / Internally generated intangible asset ‘The cost of an internally generated intangible asset comprises ‘Al dimly artrbutable costa necessary to create, produce and prepare the asset to be eapable of operating it in the manner Intended by management. Examples of directly attributable costa are 2 Cost of materials and services used or consumed in fenerating the intangible asset. b. Conte of employee benefits arising from the generation of the intanerble asset. ©. Fees to register a legal right. 4. Amortization of patents and licenses that are used to ‘generate the intangible ascet Homever, the flowing expenditures are not components of the cost ofan internally generated intangible asset! = Selling administrative and other general overhead, unless thes expenditure can be directly attnbuted 0 preparing the 1b Gleariy identified ineficiencies and initial operating lasses ‘nourred before an asset achieves planned performance © Expenditure on training staff to operate the asset PAS 98, paragraph 63, explicitly provides that “internal ly generated brands, titles, customer lists = stance shall not be recognized as ‘Such items cannot be ident rat ee eR emi weparately from the cost of Tnstead, such items are seen as memati! being components of internally Accordinely, auch expen isfy, such expenditures shall be expensed when Recognition as an expense Exgmples of expenditures that are expensed when incurred a. Startup coats ‘Start up cots may cont of rgonizaton cost uch a legal ‘and secretanal eo neared ir stabiahing legal eX Start up oxts als indude preapenng cots or expenditures to open anew fits orbs al presperating costs OF expenditures br canseteng nee porate Meng few product. bb Training costs © Advertsing a promoacal cota GL. Business relraton ot norganinaton costs Subsequent expenditre [Asarle subsequent pent nintangte set sal Be Feats on epee Tenn ht mst suet expends are ky Ta rail eased ue cts ened mie Pi mange orev, the sapere maybe xiii c= However te eugene nr! the flowing sued 0 be or a angie set ee weahe reper oemc nicht are eb osama ot operas wl dow tothe 1b. The subsequent npentsure can be measured realy Tecoma feats then eae SRR geet fmt Ae There Tap lon te om Fhe ung ostIdentifiable intangible assets AS 88 specifically pertains to identifiable intangible asset, sible asset is acquired through purchase, there ig Wine tervof legal right that would make the asset tentifable Moreover, ifthe asset could be told, transferred, licensed, ted or ald eparately, the intangible assets identiBable Examples of identifiable intangible assets are: a. Patent & Copyright © Franchise 4 Trademark or brandname © Customer list £ Computer seftware & Broadcasting license, airline right and fishing right Unidentifiable tangible asset ‘An intangible asset is unidentifiable if it eannot be sold, transferred, licensed, rented or exchanged separately The intangible ast is inherent ina continuing business an cam only be identied withthe entity as whale ‘This unidentifiable intangible asset squarely describes a i ! Z r produit. Classifcation of intangible assets 4 Intongble sete with definite tie Typical examples include patent, copyr ith red term, computer software, cuatoues het 1 tangible ases with indefinite life Typical examples include goodwill, trademark and license, ‘perpetual franchise Measurement after recognition entity Sal oe teat ot melo eatin 1, Cost model = An intangible aset shall be carried cost Jess any accumuitedametiztion and any accumulated 2 Revaluation mode ~ An tangle asset shal be carried at a revalued amount less any subsequent amortization aiid any subsequent accumulated impairment loss ‘The revalved amount is the fi value atthe date of revaluation and is determined by reference lo an active ‘market ae ‘Thus, an intangible asset can only be carried at revalued amount if there isan active market for the asset Amortization and impairment of intangible assets PAS 38, paragraph 97, states that intangible assets with, limited or Gnite life are amortized over their useful hfe Intangible assets with finite wef fe are tested for sarc uhne tae nntion of pment ee Paragraphs 107 and 108 sate that stangile assets with fndefinite life are not amortized but are tested for Hmpairment atleast entualy and whenever there ss an speation that the intangible atet may be impaired cx ogni he inp mingle St eres oma re at fn Poems a dn aeTWN OS Definition of amortization ed = a oe angen nt Normally. the intangible asset account is credited directly for the penodic amortization but an accumulated amortizotion account may be maintained. Amortization period ‘The amortizable amount of an intangible asset shall be ‘amortized on a systematic basis over the useful life Amortization shall begin when the asset is avwilable for use, meaning, when the amet is in the loeation and condition for the intended use Amortization shall cease when the intangible asset 1s erecognuzed or when the asset is classified as "held for sae Useful life The useful life of an intangible asset must be assessed as either indefinite or finite, Je finite, the uteful fe may be expressed in terms of or the number of umts to be produced. 7 fewer The useful ie of an incongibte ost indefinite whe 1st frccatie limi tothe paved exer hich the oat ‘Spmced to generte el cath fe In other words, the us no legal, contractual, would limit the useful seful life is indefinite when there are competitive and other factors that lite of the intangible osset actors affecting wel ite echnical, + eraser Mle, commercial or other type of Expected cin by compte pnt compeitors Eepected wage of eat ye ety ‘ype! produce gare Stability of the industry in wich the ant operates expected future economic benefits from the auset ‘The useful lif ofthe asset may be dependent on the useful life of other assets ofthe entity th. Period of contra over the asset and legal or similar limits ‘on the use ofthe asset, such as expiry dates of related leases. Amortization method ‘The method of amortization shall reflect the pattern in which the future economic bn fon tno reece fob consumed by the entity, Lio ome neees such pattern cannot be determined reliably, Tine method of exetiation shall be used Residual value ‘The residual value of an intangible asset shall be presumed to be zero, except: When a third go iacomnited ob the intangible asst ihe end fee ie When tae in note nok the tangle asset vo hn een meareed and 1 hat the epee ennai he au hee Btn wae ‘The residual value is reviewed at eich financial year-end. ‘A change inthe residual valve is aceounted for as change sn ‘accounting estimate “The residual vluncfaninuangbl ase! may increase toameunt equal to or greater than the cryin aout 887TANNA OS ‘Change in amortization method and useful life ‘The amortization method and the useful life of an intangibe asoet shall be reviewed at each financial year-end, Ifthe expected useful life ofthe intangible asset is significant different from previous estimate, the amortization period shal, be changed accordingly: If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method shall be changed to reflect the new pattern. ‘Such changes shall be accounted for as changes in accounting estimates and therefore, shall be treated currently and prospectively. Derecognition of an intangible asset An intangible asset shall be derecognized or eliminated from the statement of financial position: 8. On disposal of the asset When no future economic benefte are expected from use and disposal of the asset me Cin elo acing m h deesgston of en intangle ‘at aha be termined a tw aileron between the na laps! proses ad the conying omount of the ao. Disclosures related to intangible assets 4, Whether useful the usefl ves rte eit ot Be, and finite, onan rte 2. The amortization method, ‘The gross carryi The rose carrying amount and any accumulated "ization atthe beginning and end of the period. ‘The line item in th 3 income statement in which an amortization of intangible asset is included J 5, Additions, separately showing those internally generated, acquired seperately and acquired through business ‘combination, ¥ a le 66, Intangible assets classified as held for sale 7. Increases and decreases in intangible assets resulting from revaluation, 8, Impairment loses and reversal of impairment losses, 19, Net exchange differences on tran 10. The carrying amount ot ntange anet with indefinite TR ine ress i he arte 11, The carrying amount and remaining amortization period Of intangible assets that are material asset whose tile 18 12. The carrying amount of intangible ment aicted or pledged as ellateral security 18, Contractual comsitment for intangible assets 4 by way of government grant 4 Inne as ve ‘and init arch and development expenditure 15. The qoute 2 rd "a = it ei PTGoodwill Goodwill is undeniably a unique asset presented inthe financial statements Goodwill is often referred to as the most intangible of all intangible assets Goodwill is unique in the sense that goodwill standing alone cannot be bought and sold. ‘The goodwill ean nly be identified with the entity as a whole, Goodwill isan intangible asset that isnot epecfially identifiable, hha an indeterminate life, is inherent in continuing business and relates to the entity as a whol, What is goodwill? Geodilrises when earnings exceed normal earnings by reason Sane name coah df end peronnel igh vol geo, reputation for foi delings, reputation for superior produc, {ocorabl ection ond alist of regular customers, In other words, goodwill is ceated by a god re ‘between an entity and its customers: bd sone Bruin up arepuation by Padua grein by wordt mouth forhigh quality b. By responding promptly o Spe promptly and helpfully to queries and © Through the te esate Personality ofthe stoff and their attitude to Goodwill changes from day to day, Gcortil is continually changing One act of bad customer relations oe ee ocd relations igh imp ange Brow and 890 © Recognition of goody In recognizing goedwil, distinction should be made between all Geveloped gondii and puro pee Desloetgoiilritrl pris gs wich 9 rc ray ea Sa a2 Fee ue Gaye ps ch ‘Such "homegrown" gots not recorded. ‘The measurement of itenal goodwill may prove to be difficult and a great deal of subjectivity and tareprosontation mii Sct’ PAS 98, paragroph 48, provides that internally generated “ooduill Shall not be recognized as an ase Purchased gooduill is the goodwill that has been paid for. Purchased goodwill arses hen o business is purchased. “People wishing to set up « business either would start the ‘business from scratch of uy an existing business. “When an entity acquires an existing business, it will have to ‘pay not only for the net tanpble and identifiable intangible _Tasets but also the goodwil of the business, Purchased gooduill ie recognized cs an asset because it has been paid for. Measurement of goodwill . See The vale cot es ce te ban followed in meaturing goodwill, es may be Two approschey myroach and diet approach namely residual approsch 891ee ee ee en Ee eee eed ae eee oe ‘The excess ofthe purchase price over the fair value of net tangible ‘and identifiable ossets is considered as goodwill. ‘This is known as the “residual approach” because goodwill is simply the residual after deducting the fair value of net tangible tnd identifiable assets from the purchase price for the entity agreed upon between the buyer and the seller. Illustration - Residual approach ‘An entity purchased an ongoing business for P9,000,000 cash. ‘The assets and liabilities of the a sing is and lable ofthe acquired business measured Property plant and: 7 : equipment 9,800,000, Liaitiicn Account prabe Nocera ‘Accu abies Netauseusat fae valoe Purchase price ete aogired a fir value Cute sen Journal entry to record the cash Seeountarecirabe $00,000 tres orn lana 500 00 rope ecurcens ——te.000 Goode 1300 00 ‘Account payable 000,000 Notes payable 1,600,000 ‘Accrued liniities 1,000,000 oa 200 000 9.000.000 Direct approach Under this approsch, gondwil is measured on the basis of the future earnings ofthe enuty. An attempt is made to value the anticipated excess earings which are the essential ‘component of goodwill ‘This approach seems wo be « systematic and logical way of measuring goodwill because if future carninge exceed normal earnings, the exces earnings are indicative ofthe fact that there is an unidentifiable intangible asset that is causing the excess earnings, Such unidentifiable intangible asset 25 called goodwill ‘A sophisticated application of this approach requires the following information: es in the of return industry a. A normal rate of return for representative enti Shdustry, The normal roe of return ys that rate ary woually attracts investors in 8 paricul tb. The foir vale of tangible assets and any identifiable intangible assets ‘The estimated future norma enrings of the entity jon of any “excess earnings” . The probable durat attributable t «mdm 893RO AOR / Mlastration - Direct approach “The following data ere avelable in relation tothe computation of goodwill: Net ammes exchuding goodwill or ‘eval rae of return the industry fod Past earnings for 5 years preceding the sale: 2018 216 2017 21s 2019 Average earnings of the yea pera (8:000000/5) average excess earnings for 5 years . 1,000,000 ‘Normal earnings (12% 17,500,000) Average exe earns Gentil (160.000 5) Sat nan di wap nt ede fal ms ae ee Plena exling Method 2~ Capitalization of “ave = ‘The goodwill is measured at the average excess earnings capitalised at 25%. Average exes earnings Dine by eapmalmtce rate renee ae —2 400,000 fethod 8 - Capital * of “average earnings” ‘The goodwill smeared rs sverage earnings capitalized at Average earnings : Divide by captaizaton ae ove 09 Netamets mcvngpminicsprcane pice 10.00 00 ‘Less: Net assets. excluding goodwill 9 ee. o00 oon 2.500 000 ‘Method 4 ~ Present value method Under this methed the goodwill the discounted valve oF [present value ofthe average exess earnings that are expected to become evalatle in furure periods FFor example, ifthe average exess earnings of P100,000 are expected to be received anaually in 5 years, the goodwill fsosumming a discount rate of 1% ie computed as flows Average excest earings 160,000 ‘Multaply by the present value fas ordinary ; ‘anmuaty of or Syereat a Goodwil Impairment of ‘goodwill te rapagh 17 anise thst neil shall NOt PAS 38 parerae th un ie ndefini omer. gos shal Howth ehener ee = impaired. . tested for impairment at the Moreover, sce aS wed eet wma be 11 not be Joe recognized for goodwill Gubeeauent PTH odeil iw extern wuseed already J impaiemest of meiner ass teomet_—s ES EEE Negative goodwill ration transferred forty tin yorchar pice or cms 7 tnuty lene han te ot fvalue ofthe Wentitable see Syured ad nbiuessauaed, the diflerence i» hepa el PFRS 3, paragraph 34, provides that euch ne egative goodwill 1s recognized in profit or loss as “gain on ba ITERLN PUFChase” The standard has already dropped the term negative gooduill Mustration ‘Avent purchased an ongoing business fr P8,000,000 cash wheat nd Lables of che acquired business measured ‘4.000000 See pier ouraal entry ay ‘Sct nena in 2400 900 ea 2500 000 el ieee Pari oo = 1.090 00 care £00 00 Portang a ooo.cus 1000 ee 896, QUESTIONS 1. Define intangible asset 2 Explain the criteria for defining an intangible asset. 3. What are the two conditions that must be present for the recognition of an intangible ase? 4. Explain the inital measurement of intangible asset. 5. Explain the measu rement of cost of an intangible asset acquired separately 6. Give examples of costs ‘that are not included in the cost of fan intangible asset 7. Explain the measurement ofan intangible asset as part of a business combination 8. How is the ina nble asset acquired by government grant measured? 8. Explain the measurement of cost of an intangible asset acquared by exchange 10, What isthe cost ofan internally generated intangible asset? U1. Give examples of expenditures that are capitalized. as comt of an internally generated intangible asset 12 What are the two conditions that must be met for the recognition ofa subsequent expenditure on an intangable ances? 13. Explain identifuble and unidentifiable intangible assets 14. Explain the measurement of intangible asso: t after recognition. 15. Explain the amortization and impairment of intangible asset : eer so met16 What is amortization? 17 Explain the amortization period ofan intangible ase, 18 Explain the amortization method for an intangible ase, 19, Explain the useful Ife ofan intangible asset, 20, Enumerate some factors that are considered in determi the useful fe of an intangible asset. “ermining 21 Esplin the residual value ofan intangible asset, 12 Enplain derecognition ofan intangible att. 2, What i eoodwil? 2 Esplin the residual approach of measuring goodwill 25 Explain che direct approach of measuring goodwill. PROBLEMS Problem 36-1 (IAA) Sh ASAE ree os re coat abies seo et Mle ofthe aquired entity's ror = ci seoanareie sito Property. plant and equipment {300.000 6,500,000 “Accounts payable 300000 ‘Note payable —bank dong term) 1,000,000 1,900,000 Net assets at fair value 09 4,800,000 Required: 1. Determine the amount of good approach. eae 2 Prepare journal entry to record the purchase of the entity: Problem 36-2 (IAA) ing the residual Keen Company purchased an entity for P6,000,000 cash at the beginning of the curest year. The carrying amount and fair Value of the assets of the scquired entity on the date of facquisition are as flows: Cerryingamount Fair value 50,000 ‘Account receivable 500,000 feventary 1,000,000, Patent 0 Property, plantandequmeat 12,000,000 addition, se aquired ety bad crounte tn adion ete ame of equation he totaling P2000 rary nae tan snes Required: 1. Determine the amount of goodwill using the residual 2, REPRE al ety ed the phan ofthe entsProblem 36-3 (IAA) tity for P8,000,000, naan ees - Lao ng eta Pac ° 1,000,000 ery 0000 Inpraeresarch and developent 5.000 000 ‘ised wore 1 2ea.000 Acountapaate 2.600.000 Seperae 400,00 Required: 1. Determine the amount of goodwill. 2 Prepare journal entry to record the acquisition, Problem 36-4 (LAA) Meck Company is considering the acquisition of another entity ‘The following data relate to the acquiree: ‘Shareholders equity 5.000.000 Earnings for por three yeare 1,500,000 ‘The acquiree has a valuable patent which is not recorded. If the entity s sold, the patent would be transferred to the buver {or P300,000. Other assets are properly appraised. The patsat ‘has a remaining life of 5 years. The earnings of the entity are ‘gxpected to increase 10% more than the average earnings of the past thre yeare before taking int constlensa i ‘emortization of the patent cost. "e Gevation th Required: ‘Compute the goodwill under the following method: 8 Average fre ea alin 5 Goodtits easured at wgraalae at eid aio hema ea is measured the present valas of the average ‘ees earns dacounted a 10% fx four yea ah ner ‘rate at 8%. The present value ordinary ye “ Pear dig, em entnary anny ofr ¢ earnings problem 365 (IAA) Naughty TorPary twentieth flowing data relative 0 & certain entity in determining the amount to be pand for Pet assets and goodwill Asset a fir value bef ot {nbiitiee Shareholder egy Net earnings after ehmanstion of unatual or nfrequent items 2018, as 18 250,000 2017 300.000 2018 250.000 2019 270,000 Required: Calculate the amount of goxdwill under dhe following, 1. Average earnings are capitalized at 10% 2. A retum of 8 8 considered normal on net assets at fair ‘value, Excess earnings are capitalized at 15%. 8 A return of 108 onder normal cm et ase a IF Value. Gocdbwil is measured at 5 years excess earning vet ena a fi eur of 4 wena alo eet ot 4 Arter tap an egecedtosani 1 Goodwils measred bythe present value method wang a ec vate. The present value of a ordinary anmuty 128% for 10 yearns 565 gor =_)eee ae EE 2 Prepare journal entry to record the acquisition Problem 36-6 (IFRS) Brisbane Company has recently diversified by taking ove th, operations of Darwin Company at a cost of P9,000,000, Darwin Company manufactures ad sella cleaning cloth cat the "Supereipe’ which was developed by highly trained od iesovetire snarl ‘The unique nature of the coating used on the "Superswipe* has resulted in Darwin Company acquiring a significant share of the South African market. A recent expansion into the equatorial African market has proved successful. ‘As a result of the takeover, Brisbane Company acquired the following assets and liabilities at fair value 3,500,000 : 2,000,000 1,800,000 7 "700,000, 8,000,000 In addition, Darwin Company owned, but had not recognized, the following: + Trademark “Superswipe" with fair value of P1,000,000. Patent — Formula for the special coating with fair value of 500,000. ‘The research staff of Darwin Company agreed to join the staff of Brisbane Company and will continue to work on a number of projects aimed at producing specialized version of the 1. Determine the goodwill arising from the acquisition. nn Problem 36-7 144) t P50 per share all of another entity. The ‘arquiree on the date of with a carrying amount of statement of fina: outstanding | acquisition showed yey a2" the, 6,000,000. fete ‘The fair value of | date was PBDD.00) gee tod epost on me Purchase? db recorded as gondwill onthe date of Problem 368 (AA) ‘Casanova Company purchased another entity for PS,000,000 ccash. The followin carrnag amount and fair value were ‘associated with ths equation Carryingamount Fairvalue Accounts receivable 2,000,000 2,000,000 Inventory time “Senea Goverment tt 100 00 Equpoen! 400,000 $00,000 Setter on pee esn0o®) 000.000 Netensets 000 2.000.000 Th fir vale aati he everest ttf we een anh egal oy contractual he cae pe os an thee 20.8 Tharket trading for an intaneble ofthis cor What is the gooeil arising from the aequsinon 3,000,000 8,600,000 4:00,000 peorY 1 4 YASUE AQRRL Problem 36-9 (IAA) rina se, Se ea Additionally, the fair value of the acquiree’s identifiable assets on this date was P400,000 in excess of carrying amount. In the statement of financial position, what amount should be reported as goodwill as a result of the acquisition? a 1,000,000 b. 400,000 600,000 350,000 Problem 36-10 (IAA) At the current year-end, Clever Company purchased for 4,000,000 cash all of the outstanding ordinary shares of ‘another entity when the statement of financial position of the acquire showed net assets of P3,200,000. ‘The acquiree revealed the following fair value and carrying amount of assets and liabilities: Carrying amount Property plant and equipment,net 8,000,000 assets 00,000 Long-term debt 3,000;000, As a result of the transaction, what amount should be Feported as goodwill in the statement of financial poston at current yearend? 350,000 250.000 750,000 800,000 b © Longelived SB cash in the future a Held for sate (Coste incurred imeraly wets ictangble eset are a. Capitaled Catal tt et c. Expensed when incurred “fate 4 Expenedfwi bed 1. Which method of nortan s normally used for an p intangible asse? ‘ ‘a. Sum of the ye dts . Straight line Unite of prion 4d. Double detnng balsce eee pues ; onal et Ce ee a i . Legally restricted ant oodiall type .10. . Which of the followi: x Which type of intangible asset is amortized? a. Limited i . Indefinite life : soe bs Both limited life and indefinite life d. Neither limited life nor indefinite life Entities should evaluate indefinite life intangible assety at least annually for a. Recoverability b. Amortization c. Impairment d. Estimated useful life . The major problem of accounting for an intangible Asset is determining Fair value Separability Residual value Useful life poop . Which of the following is not an intangible asset? Trade name Research and development cost Franchise . Copyright Boop h of 0 ng represents the maximum amortization period mandated for an iritangible asset with finite useful life? - 10 years . 20 years 40 years . No arbitrary ca, ’ established, Pon the useful life has been Boop 906