CFA Level I · CFA Level I Exam · Analyzing Balance Sheets
Under IFRS, an entity acquires a patent in a separate purchase and expects it to generate benefits for a definite period. The patent is most likely:
The purchased patent is most likely recognised as an intangible asset at cost and amortised over its finite useful life. Separately acquired identifiable intangibles meet recognition criteria, whereas goodwill arises only in business combinations and is not amortised under IFRS.
- Arecognised as an intangible asset and amortised over its useful lifeCorrect
- Bexpensed immediately because intangibles are never capitalised
- Crecognised as goodwill and tested annually for impairment
Explanation
An externally acquired identifiable intangible meets recognition criteria and is capitalised at cost. With a finite life it is amortised over that life. Goodwill arises only in a business combination, and the claim that intangibles are never capitalised is wrong for purchased intangibles.
Did you get it right without looking?
One question tells you little. A timed set on Analyzing Balance Sheets shows your real accuracy, how long you take and where you lose marks.
More Analyzing Balance Sheets questions
- A company's financial statements are prepared under IFRS. A lawsuit has been filed against it, and its lawyers assess the chance of losing a…
- An analyst compares two otherwise identical banks. Bank X classifies its bond portfolio as measured at amortized cost, and Bank Y classifies…
- Under IFRS, a company presents its statement of financial position using a current/non-current classification. Which of the following items …
- Under IFRS, a company that uses the revaluation model for a class of property, plant and equipment records a revaluation increase above the …
- A company's accumulated other comprehensive income (AOCI) most likely includes:
- A liquidity-based presentation of the statement of financial position, rather than a current/non-current classification, is most likely appr…