Reference no: EM133015081
Question - Fresh it Up Limited, an established and well-known brand, selling fresh fruits and vegetables, acquired Freshers Limited,another popular brand well known in the industry. Freshers Limited was acquired for R35000000 which was paid in full on the 1st of January 2020, the date of acquisition.Legal fees of R550000 were spent in acquiring this brand. The legal fees were paid on the 31st of March 2020. The Freshers stores were closed to allow for staff training on the brand amounted to R1650000. Training took place in March and April 2020 to allow for trading from the 1st of June 2020. Sales of this brand commenced from the 1 June 2020.
Fresh it Up Limited's head accountant, Molly, went on maternity leave therefore the deputy accountant has been holding the fort. The deputy accountant, I am Unsure, received an email from the CEO of Fresh it Up Limited, requesting information on the purchase of this new brand. The CEOis not anaccountant and is therefore confused with the accounts presented to him. AsIamUnsure, is so busy with the day-to-dayoperations, he has requestedyouto writeback to the CEO providing the answers to his queries.
Required - Write memo to the CEO of Fresh it Up Limited outlining the following:
1. What is the definition of an intangible asset?
2. What is the recognition criteria of an intangible asset?
3. Discuss with reason whether Freshers Limited can be recognized as an Intangible asset with reference to IAS 38.
4. What is the correct accounting treatment for Freshers Limited in the financial statements of Fresh it Up Limited.
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