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ACCA Applied Knowledge · Financial Accounting · Intangible non-current assets and amortisation

Kora Co acquired a licence for $120,000 and incurred legal fees of $5,000 to register it, plus $3,000 of general administration costs and $2,000 of staff training costs related to using it. What is the cost of the licence recognised as an intangible asset?

The licence is recognised at $125,000, being the $120,000 purchase price plus $5,000 directly attributable legal registration fees. General administration costs and staff training are not directly attributable to bringing the asset into use and are expensed.

  1. A$125,000Correct
  2. B$130,000
  3. C$120,000
  4. D$128,000

Explanation

Cost includes the purchase price plus directly attributable costs of preparing the asset for use, here legal registration fees: $120,000 + $5,000 = $125,000. General administration and training costs are expensed. $130,000 wrongly includes both of those; $128,000 includes admin costs.

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