Recovery of impairment is recognized under IFRS for all the following except:

(a) patent held for sale.

(b) patent held for use.

(c) trademark.

(ad goodwill.

Short Answer

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d. Goodwill.

Step by step solution

01

Meaning of Impairment of Intangible asset

Amortization of Intangible Assets alludes to the strategy under which the cost of the distinctive intangible assets of the company (assets that don't have any physical existence and cannot be felt and touched like trademark, goodwill, patents, etc.) are expensed over the particular period.

02

Explaining the correct option

If goodwill increases in later periods following the recognition of impairment losses, such an increase will be seen as a growth in internal goodwill rather than an increase in acquired goodwill (purchased goodwill).

So, the correct option is (d) goodwill.

03

Explaining the incorrect option

Option a) Long-lived assets held for sale are those for which a trade incorporates a clear arrangement to offer them. They are not subject to devaluation and are recorded on the balance sheet at the least of carrying value or reasonable value.

Option b) An innovation is allowed a select benefit known as a patent. In other terms, a patent is an elite right to a great or a strategy that ordinarily gives a new approach to a task or a novel technical arrangement to a challenge.

Option c) A trademark may be a symbol that can be used to partition one company's items or administrations from those of other companies. Intellectual property rights give security to trademarks.

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Most popular questions from this chapter

Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2015, the company expends \(325,000 on a research project, but by the end of 2015, it is impossible to determine whether any benefit will be derived from it.

  1. What account should be charged for the \)325,000, and how should it be shown in the financial statements?
  2. The project is completed in 2016, and a successful patent is obtained. The R&D costs to complete the project are \(130,000 (\)36,000 of these costs were incurred after achieving economic viability). The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2016 total \(24,000. The patent has an expected useful life of 5 years. Record these costs in the journal entry form. Also, record patent amortization (full year) in 2016.
  3. In 2017, the company successfully defends the patent in extended litigation at a cost of \)47,200, thereby extending the patent life to December 31, 2024. What is the proper way to account for this cost? Also, record patent amortization (full year) in 2017.
  4. Additional engineering and consulting costs incurred in 2017 required to advance the design of a new version of the product to the manufacturing stage total $60,000. These costs enhance the design of the product considerably, but it is highly uncertain if there will be a market for the new version of the product. Discuss the proper accounting treatment for this cost.

Hendricks Corporation purchased trading investment bonds for \(50,000 at par. On December 31, Hendricks received an annual interest of \)2,000, and the fair value of the bonds was $47,400. Prepare Hendricks’ journal entries for (a) the purchase of the investment, (b) the interest received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.)

Use the information provided in BE12-1. Assume that at January 1, 2019, the carrying amount of the patent on Taylor Swift’s books is \(43,200. In January, Taylor Swift spends \)24,000 successfully defending a patent suit. Taylor Swift still feels the patent will be useful until the end of 2026. Prepare the journal entries to record the $24,000 expenditure and 2019 amortization.

Question: Why are held-to-maturity investments applicable only to debt securities?

Question: Indicate whether the following items are capitalized or expensed in the current year.

  1. Purchase cost of a patent from a competitor.
  2. Research costs.
  3. Development costs (after achieving economic viability).
  4. Organizational costs.
  5. Costs incurred internally to create goodwill.
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