Reference no: EM132905936

Question - You have recently joined a firm of accountants and have been asked to advise different clients. The clients prepare their financial statements under IFRS standards. However, they are considering changing to the use of US GAAP. The finance director have sought your help with the following issue, which will have an impact on the financial statements for the year ending 31 December 2020.

On 1st January 2017, Busy Bees plc acquired for £4,000,000 an intangible asset (trademark) that they perceived they would use indefinitely. However, they were facing difficultly in determining its useful life and they decided to amortise it over a 10year period, with the straight-line method. In December 2020, a competitor revealed a product which, when launched, will significantly reduce demand for the Busy Bees' product that is associated with the intangible asset. At as of the year end date, Busy Bee assesses the recoverable amount of the intangible asset at £600,000 and they intend to continue manufacturing the underlying product for another three years.

REQUIRED - Showing your calculations where appropriate and explaining the accounting treatment by reference to IFRS Standards. Client also asks if the treatment for this case would be different under US GAAP.