- 11 Marks
Question
Intangibles assets by their nature do not exist physically under IAS 38 Intangible assets. The
following information on initial cost of intangibles asset were extracted from the Notes to the
financial statements of Igbo-hood Limited, a film production company on January 1, 2017:
Additional Information:
(i)
(ii) Intangible assets are to be amortised on a straight line basis.
Required:
a. Calculate the costs of the following intangible assets:
i. Market based
ii. Customer related
i. Artistic related
iv. Contract based
v. Technology based
b. Calculate the carrying amounts of the following intangibles assets as at December 31, 2017
i. Quick books and SAGE
ii. Trade marks
iii. Plays
iv. Franchise
Answer
(a) Calculation of the Costs of Intangible Assets
- Market-based Intangible Assets:
- Trademarks for customers: N4,600,000
- Internet: N5,400,000
- Total Market-based cost = N10,000,000
- Customer-related Intangible Assets:
- Order or production backlog: N4,000,000
- Customers’ contract: N4,400,000
- Total Customer-related cost = N8,400,000
- Artistic-related Intangible Assets:
- Books and literary works: N800,000
- Video and motion picture films: N2,500,000
- Pictures and photographs: N3,400,000
- Plays: N4,200,000
- Total Artistic-related cost = N10,900,000
- Contract-based Intangible Assets:
- Franchise: N3,200,000
- Broadcasting rights: N5,000,000
- Total Contract-based cost = N8,200,000
- Technology-based Intangible Assets:
- QuickBooks and SAGE: N950,000
- Patents: N1,200,000
- Trade secrets: N4,800,000
- Total Technology-based cost = N6,950,000
(b) Calculation of Carrying Amounts of Intangible Assets as at December 31, 2017
Assumption: The assets are amortized on a straight-line basis over their useful lives.
- QuickBooks and SAGE:
- Initial cost: N950,000
- Amortization period: 5 years
- Acquired on January 1, 2016
- Amortization for 2 years:
Amortization = (950,000 / 5) × 2 = N380,000 - Carrying amount = N950,000 – N380,000 = N570,000
- Trademarks:
- Initial cost: N4,600,000
- Amortization period: 8 years
- Acquired on January 1, 2015
- Amortization for 3 years:
Amortization= (4,600,000 / 8) ×3 = N1,725,000 - Carrying amount = N4,600,000 – N1,725,000 = N2,875,000
- Plays:
- Initial cost: N4,200,000
- Amortization period: 7 years
- Acquired on January 1, 2014
- Amortization for 4 years:
Amortization= (4,200,000/7) × 4 = N2,400,000 - Carrying amount = N4,200,000 – N2,400,000 = N1,800,000
- Franchise:
- Initial cost: N3,200,000
- Amortization period: 8 years
- Acquired on January 1, 2013
- Amortization for 5 years:
Amortization= (3,200,000 / 8) × 5 = N2,000,000 - Carrying amount = N3,200,000 – N2,000,000 = N1,200,000
- Tags: Amortization, Carrying Amount, Customer-Related, Intangible Assets, Market-Based, Technology-Based
- Level: Level 2
- Topic: Property, Plant, and Equipment (IAS 16)
- Series: NOV 2018
- Uploader: Kwame Aikins