Reference no: EM132573955

Question - Intangible Assets

Flintstone Ltd has several intangible assets to report at 30 June 2020 as follows:

Research and development asset at recoverable amount $250 000

Trademark at cost $1 000 000

Masthead of a newspaper at directors' valuation $1 300 000

Additional information -

The research and development asset comprises the following expenditure incurred in the research phase: $120 000, and in the development phase: $72 000. The development costs meet the test for capitalisation contained in AASB 138 'Intangible Assets'. The estimated recoverable amount for the development project is $250 000. No amortisation is required under AASB 138 until commercial production starts (scheduled to start in 2022).

Flintstone Ltd purchased a trademark for $1 000 000 2 years ago, which can be renewed indefinitely, subject to continued use. The management believed that the trademark could be sold for a minimum of $2 500 000.

Within the last year, Flintstone Ltd has spent considerable time and resources totalling $500 000 establishing a new national newspaper. Based on current figures, its circulation is expected to steadily increase for the foreseeable future years and directors have revalued the masthead to $1 300 000 which is what they estimate they could sell it for in the current economic conditions.

REQUIRED -

1. For each asset, specify how it should be reported (i.e., capitalised or expensed) by Flintstone Ltd in accordance with the requirements of AASB 138 'Intangible Assets'. Provide justification.

2. For each asset, specify and provide justification for the following accounting decisions:

The appropriate measurement basis (identify any choices that may be available to the management of Flintstone Ltd, i.e., cost model or revaluation model.), and

Whether the asset is subject to amortisation.

3. Calculate the carrying amount of each asset for the current year ended 30 June 2020.