ACCA Applied Skills · Financial Reporting · Intangible assets
Cobalt Co bought a trademark for $150,000 plus $10,000 non-refundable purchase taxes. It also incurred $6,000 on staff to bring it into use, $4,000 on advertising to promote the newly acquired brand and $5,000 in general administration overheads. Which amount is the initial cost of the trademark under IAS 38?
The initial cost is $166,000. It comprises the $150,000 price, $10,000 non-refundable purchase taxes and $6,000 directly attributable staff costs of bringing it into use. Advertising and general administration overheads are not part of cost under IAS 38 and are expensed.
- A$165,000
- B$160,000
- C$166,000Correct
- D$169,000
Explanation
Cost includes the purchase price, non-refundable purchase taxes and directly attributable costs of preparing the asset for use: 150,000 + 10,000 + 6,000 = $166,000. Advertising and general overheads are excluded. $160,000 omits the staff costs, $165,000 wrongly includes administration overheads instead of staff costs, and $169,000 wrongly includes advertising.
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