Testbank

to accompany

Applying International
Accounting Standards
by
Alfredson, Leo, Picker, Pacter & Radford
Prepared by
Victoria Wise

John Wiley & Sons Australia, Ltd 2005

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CHAPTER 9 Intangible assets

Question 1
In relation to the amortisation of intangible assets, if an intangible asset has a finite useful life:
A
B
C
D

it must be amortised over a period not exceeding 40 years;

it must be amortised across a period not exceeding 5 years;
it is not subject to an annual amortisation charge;
it must be amortised over that life.

Question 2
In relation to the amortisation of intangible assets, the general rule in IAS 38 Intangibles, is that
unless demonstrated otherwise:
A
B
C
D

the residual value does not enter into the determination of the amortisation charge;
the residual need no be reviewed at the end of each annual reporting period;
all intangible assets have a residual value at least equal to the amount of maintenance
costs incurred;
the residual value is presumed to be zero.

Question 3
In relation to amortisation of intangible assets, IAS 38 Intangibles, requires that intangible assets
with indefinite useful lives:
A
B
C
D

are amortised by the straight-line method across their useful lives;

must be amortised across a period of no more than 20 years;
are not subject to an amortisation charge;
should not be amortised in a period in which maintenance of the asset occurs.

Question 4
IAS 38 Intangibles, requires that the following items in relation to intangibles, each be disclosed
separately:
A
B
C
D

the opening balance of each intangible;

the closing balance of each intangible;
any impairment losses reversed in profit or loss during the period;
all amounts of intangibles acquired during the period.

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Question 5
For the purposes of determining the fair value of an asset in an active market, an active market is
defined in IAS 38 Intangibles, as one that has all of the following conditions:
The items traded in the market are homogeneous
Willing buyers and sellers can normally be found
Prices are available to the public
A
B
C
D

I
II
III
Yes Yes No
No Yes No
Yes No Yes

IV
Yes
Yes
Yes

I;
II;
III;
IV.

Question 6
When an intangible asset is acquired by an exchange of assets, which of the following measures
will need to be considered in the determination of that cost? The:
A
B
C
D

fair value of the asset given up;

initial cost of the asset given up;
carrying amount of the asset received;
replacement cost of the asset received.

Question 7
Internally generated goodwill is prohibited from recognition in the financial statements of an
entity. The reason for this treatment is that:
A
B
C
D

goodwill is not identifiable;

goodwill is not measurable;
it is not comparable to any other intangible assets;
it is not prudent to recognise intangible assets.

Question 8
According to the definition provided in IAS 38 Intangibles, activities undertaken in the
research phase of the generation of an asset may include:
A
B

the application of knowledge to a design for the production of new materials;

original and planned investigation with the prospect of gaining new scientific
knowledge;

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D

the use of research findings to create a substantially improved product;

using knowledge to materially improve a manufacturing device.

Question 9
According to IAS 38 Intangibles, in order to be able to capitalise development outlays an entity
must be able to demonstrate the following:
I.
II.
III.
IV.
A
B
C
D

Technical feasibility and intention of completing the asset so it will be available

for use or sale.
Its ability to reliably measure the expenditure on the development of the asset.
Ability to use or sell the asset.
How the asset will generate probable future economic benefits.

I, II and IV only;
II, and IV only;
I, II, III and IV;
II, III and IV only.

Question 10
When an internally generated asset meets the recognition criteria, the appropriate treatment for
costs previously expensed is:
A
B
C
D

reinstatement;
no adjustment as these amounts may not be reinstated;
include in the cost of the development of the asset;
capitalise into the cost of the asset and adjust the opening balance of retained
earnings.

Question 11
Paragraph 63 of IAS 38 Intangibles, prohibits the recognition of the following internally
generated identifiable intangibles:
Brands
Mastheads
Publishing titles
Customer lists
A
B
C

I
II
III
No No No
No Yes Yes
No No Yes
No Yes No

IV
Yes
Yes
Yes
Yes

I;
II;
III;

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IV.

Question 12
Under Kaplan and Nortons Balanced Scorecard approach for the measurement of non-financial
elements that affect a business, the outcome measurements identified for employee capabilities
were:
I.
II.
III.
IV.
A
B
C
D

Employee productivity.
Employee retention.
Employee remuneration.
Employee satisfaction.

I, II and IV only;
I, II and III only;
II, III and IV only;
I, II, III and IV.

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ANSWERS
1

10

11

12

Applying International Accounting Standards Chapter 9