Reference no: EM133003236

Question -

Q1. A company generated a customer list and brand internally, which it deems highly valuable. Management conduct an assessment of the customer list and brand and thinks the value of each is currently $250 million and $150 million respectively. Management also believes that each should have a useful life of 10 years.

Required - Briefly discuss the appropriate treatment of each item in accordance with IAS 38.

Q2. An entity is currently conducting research and development of a new product. During 2018, the entity incurred research cost of $750 million. However, during April 1, 2018 to June 30, 2018, the entity incurred development cost of $150 million and an additional $50 million from July 1, 2018. It was also ascertained by management that the product has reached technical, financial and commercial feasibility as of July 1, 2018. Similar intangible assets are amortized over ten years.

Required - a. Briefly discuss the treatment of the above costs.

b. Prepare the relevant financial statement extracts as at and for the period ended December 31, 2018.

Q3. Majestic Enterprise Limited currently depreciates all its non-current assets using a straight line basis over a period of ten years. However, management decided on January 1, 2019 that even though its non-current assets have a remaining useful life of two years, a revision will be made to increase the remaining useful life to five years instead.

On the matter of its inventories, which are all currently carried at average cost method, a change will be made as of January 1, 2019 to first in first out method. If the first in first out method was used initially, then the entity's cost of sales would have experienced an accumulated decrease of $400 million.

Required - Briefly discuss the effect of the changes made by management in accordance with IFRS.