DipIFR Syllabus B. Elements of financial statements - IAS 38 Intangible asset - Past Papers ^{1 / 4}

You are the financial controller of Omega, a listed entity which prepares consolidated financial statements in accordance with International Financial Reporting Standards (IFRS® Standards). The financial statements for the year ended 30 September 2018 are due to be published shortly. A trainee accountant who is assigned to your department is reviewing the financial statements as part of a training exercise. She has prepared a list of queries arising out of this review.

Query Two
When I looked at the note detailing the intangible assets we include in our consolidated statement of financial position, I noticed that several brand names associated with subsidiaries we acquired recently were included in this figure. Therefore I also expected to see a figure for the Omega brand name included within intangible assets. There doesn’t appear to be any amount for the Omega brand name included within intangible assets and I don’t understand why. The Omega brand name has been developed within Omega for a number of years and is well regarded by our customers. Surely it’s a mistake not to include it as well? (6 marks)

Required:
Provide answers to the queries raised by the trainee. You should justify your answers with reference to relevant IFRS Standards.

Note: The mark allocation is shown against each of the three queries above.

You are the financial controller of Omega, a listed entity which prepares consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). The chief executive officer (CEO) of Omega has reviewed the draft consolidated financial statements of the Omega group and of a number of the key subsidiary companies for the year ended 31 March 2018. None of the subsidiaries are listed entities but all prepare their financial statements in accordance with IFRS. The CEO has sent you an email with the following queries:

Query Three
When I read the disclosure note relating to intangible non-current assets in the consolidated financial statements, I notice that this figure includes brand names associated with subsidiaries which we’ve acquired in recent years. However, the brand names which are associated directly with products sold by Omega (the parent entity) are not included within the non-current assets figure. This is another inconsistency that I don’t understand. Please explain how this practice can be in line with IFRS requirements. One final question: would I be right in thinking that, as with property, plant and equipment, we can use the fair value model to measure intangible assets? (8 marks)

Required:
Provide answers to the three queries raised by the chief executive officer. Your answers should refer to relevant provisions of International Financial Reporting Standards.

Note: The mark allocation is shown against each of the three issues above.

You are the financial controller of Omega, a listed company which prepares consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). The year end of Omega is 31 March and its functional currency is the $. Your managing director, who is not an accountant, has recently prepared a list of questions for you concerning current issues relevant to Omega:

(b) You will be aware that we intend to open a new retail store in a new location in the next few weeks. As you know, we have spent a substantial sum on a series of television advertisements to promote this new store. We paid for advertisements costing $800,000 before 31 March 2014. $700,000 of this sum relates to advertisements shown before 31 March 2014 and $100,000 to advertisements shown in April 2014. Since 31 March 2014, we have paid for further advertisements costing $400,000. I was chatting to a colleague over lunch and she told me she thought all these costs should be written off as expenses in the year to 31 March 2014. I don’t want a charge of $1·2 million against my 2014 profits! Surely these costs can be carried forward as intangible assets? After all, our market research indicates that this new store is likely to be highly successful. Please explain and justify the treatment of these costs of $1·2 million in the financial statements for the year ended 31 March 2014. (6 marks)

Required:
Provide answers to the issues raised by the managing director.

Note: The mark allocation is shown against each of the three issues above.