ACCA Applied Skills · Financial Reporting · Intangible assets
Brindle Co spent $240,000 on a staff training programme this year which it believes will improve productivity for several years. It also paid $90,000 for a licence to use a patented process for 5 years, which gives it legal rights that others cannot use. What total amount should Brindle recognise as an intangible asset?
Brindle should recognise $90,000. The patented process licence is identifiable and controlled through legal rights, so it is capitalised. The $240,000 training spend is expensed because the entity cannot control the future benefits from trained staff, so it fails the control criterion in IAS 38.
- A$330,000
- B$240,000
- C$90,000Correct
- D$0
Explanation
Training costs are not recognised as an intangible asset because the entity lacks sufficient control over future benefits from skilled staff, so they are expensed. The licence is identifiable and controlled through legal rights, so $90,000 is capitalised. Adding both gives $330,000, which wrongly capitalises the training.
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