Reference no: EM132581518
Six examples of purchased intangible assets follow. They are reported on the consolidated statement of financial position of Powers Enterprises Limited and include information about their useful and legal lives. Powers prepares financial statements in accordance with IFRS.
Intangible 1(i) is the trade name for one of the company's subsidiaries. The trade name has a remaining legal life of 16 years, but it can be renewed indefinitely at a very low cost. The subsidiary has grown quickly and been very successful, and its name is well known to Canadian consumers. Powers management has concluded that it can identify positive cash flows from the use of the trade name for another 25 years, and assumes the cash flows will continue even longer.
Intangible 1(ii) is the trade name as identified in 1(i), but assume instead that Powers Enterprises expects to sell this subsidiary in three years, since the subsidiary operates in an area that is not part of Powers' core activities.
Intangible 2 is a licence granted by the federal government to Powers that allows Powers to provide essential services to a key military installation overseas. The licence expires in five years, but is renewable indefinitely at little cost. Because of the profitability associated with this licence, Powers expects to renew it indefinitely. The licence is very marketable and will generate cash flows indefinitely.
Intangible 3 is a magazine subscription list. Powers expects to use this subscriber list to generate revenues and cash flows for at least 25 years. It has determined the cash flow potential of this intangible by analyzing the subscribers' renewal history, the behaviour of the group of subscribers, and their responses to questionnaires.
Intangible 4 is a non-competition covenant. Powers acquired this intangible asset when it bought out a major owner-managed competitor. The seller signed a contract in which he agreed not to set up or work for another business that was in direct or indirect competition with Powers. The projected cash flows resulting from this agreement are expected to continue for at least 25 years.
Intangible 5 is medical files. One of Powers' subsidiary companies owns several dental clinics. A recent purchase of a retiring dentist's practice required a significant payment for the practice's medical files and clients. Powers considers that this base will benefit the business for as long as it exists, providing cash flows indefinitely.
Intangible 6 is a favourable lease. Powers acquired a sublease on a large warehouse property that requires an annual rental amount that is 50% below competitive rates in the area. The lease extends for 35 years.
Instructions
For each intangible asset and situation described above, do the following:
Question (a) Identify the appropriate method of accounting for the asset subsequent to acquisition, and justify your answer.
Question (b) Provide an example of a specific situation that would cause you to test the intangible asset for impairment.
2008 federal trade commission report on consumer fraud
: 1. According to the February 2008 Federal Trade Commission report on consumer fraud and identity
|
Find what is the total stockholders equity
: What is the total stockholders' equity? Common Stock, $10 par 7,000 shares issued, $70,000; Paid-in Capital in Excess of Par $20,000
|
Which pool should she buy
: Which pool should she buy? (final answer as a number of gallons that each pool can hold.)
|
Calculate the probability distribution for variable
: X = number of successes, as discrete variable. Calculate the probability distribution for variable X, if n = 10, p = 0.1. with the Poisson distribution!
|
Identify the appropriate method of accounting for the asset
: Identify the appropriate method of accounting for the asset subsequent to acquisition, and justify answer. Six examples of purchased intangible assets follow
|
Can the buyer be quite certain that the two brands
: A potential buyer of light bulbs bought 50 bulbs of each of 2 brands. Upon testing the bulbs, he found that brand A has a mean life
|
Estimate the average current visa balance
: How large would the university student population have to be in order to be regarded as effectively infinite in each of the following samples?
|
Determine the pH during the titration
: Determine the pH during the titration of 193 ml of 0.4 M HBr with 193 ml of 0.4 M KOH. List five possible water purification processes
|
What are the weaknesses in corporate governance
: What are the strength and weaknesses in corporate governance? Give recommendations to reduce the weaknesses. Provide the suitable example.
|