...COMPANIES 5 Disclosures on Intangible Assets 5 Compliance with AASB 138, Paragraphs 118 to 123 and 126 to 128 6 Differences in Disclosures Between the Two Companies 7 RECOMMENDATIONS 9 LIST OF REFERENCES 10 APPENDICES 11 Appendix A – Cervantes Corporation Ltd. – Consolidated Statement of Financial Position 11 Appendix B – Cervantes Corporation Ltd. – Note 1 (i) 11 Appendix C – Cervantes Corporation Ltd. – Note 13 12 Appendix D – Clean Seas Tuna Limited – Consolidated Statement of Financial Position 12 Appendix E – Clean Seas Tuna Limited – Note 1 (e) 13 Appendix F – Clean Seas Tuna Limited – Note 18, part 1 13 Appendix G – Clean Seas Tuna Limited – Note 18, part 2 14 Appendix H – Clean Seas Tuna Limited – Note 18, part 3 15 Appendix I – Clean Seas Tuna Limited – Note 18, part 4 15 EXECUTIVE SUMMARY This research-based case study and report aims to review the disclosure requirements for intangible assets in an attempt to improve the quality of financial reporting. The study was based on the comparison of the disclosures for the intangible assets of two Australian Securities Exchange listed companies from the same industry, using their latest annual reports. The selected companies are Cervantes Corporation Ltd. and Clean Seas Tuna Limited, both participating in the aquaculture industry. The comparison was done by evaluating individual Notes to the Financial Statements as of June 30, 2012, noting all the disclosures presented for intangible assets and determining compliance...
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... has been expanded to state that expected future reductions in the selling price of items produced by an item of property, plant and equipment could indicate technical or commercial obsolescence (and therefore a reduction in the economic benefits embodied in the item), rather than a change in the depreciable amount or period of the item. Amendments to IAS 38 Paragraphs 98A - 98C have been added to clarify that there is a presumption that revenue-based amortisation is not appropriate, and that this can only be rebutted in limited circumstances where either: – The intangible asset is expressed as a measure of revenue, or – Revenue and the consumption of the economic benefits of the intangible asset are highly correlated. Paragraph 98B clarifies that as a starting point to determining an appropriate amortisation method, and entity could determine the predominant limiting factor’ inherent in the intangible asset, for example: – A contractual term which specifies the period of time that an entity has the right to use an asset – Number of units allowed to be produced – Fixed total amount of revenue allowed to be received. Paragraph 98C then clarifies that where an entity has identified that the achievement of a revenue threshold is the...
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...9 INTANGIBLE ASSETS PERSPECTIVE AND ISSUES Long-lived assets are those that will provide economic benefits to an enterprise for a number of future periods. Accounting standards regarding long-lived assets involve determination of the appropriate cost at which to record the assets initially, the amount at which to present the assets at subsequent reporting dates, and the appropriate method(s) to be used to allocate the cost or other recorded values over the periods being benefited. Under international accounting standards, while historical cost is the defined benchmark treatment, revalued amounts may also be used for presenting long-lived assets in the statement of financial position if certain conditions are met. Long-lived assets are primarily operational in character, and they may be classified into two basic types: tangible and intangible. Tangible assets have physical substance, while intangible assets either have no physical substance, or have a value that is not conveyed by what physical substance they do have (e.g., the value of computer software is not reasonably measured with reference to the cost of the diskettes on which these are contained). The value of an intangible asset is a function of the rights or privileges that its ownership conveys to the business enterprise. Intangible assets can be further categorized as either 1. Identifiable, or 2. Unidentifiable (i.e., goodwill). Identifiable intangibles include patents, copyrights, brand names, customer...
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...38: INTANGIBLES 1. Define an “intangible asset”. (1 Mark) 2. Define an “active market”. (1 Mark) 3. Define “research”.(1 Mark) 4. Define “development”. (1 Mark) 5. When does an asset meet the identifiability criterion? (1 Mark) 6. When should an intangible asset be recognised? (1 Mark) 7. How should an intangible asset be measured initially? (1 Mark) 8. How should internally generated goodwill be accounted for? (1 mark) 9. Name two (2) of the criteria that must be met if an intangible asset arising from the development phase is to be recognised? (1 Mark) 10. To assess whether outlays internally generated intangible asset meets the criteria for recognition, an entity classifies the generation of the asset into one of two phases. Name these phases. (1 Mark) 11. How is an internally generated intangible asset arising from the research phase accounted for? (1 Mark) 12. How is an internally generated asset arising from the development phase accounted for? (1 mark) 13. Subsequent to initial recognition how is an internally generated intangible asset measured? (1 Mark) 14. Over what period of time is an internally generated intangible asset amortised? (1 Mark) 15. Which recognition criterion is always considered to be satisfied when accounting for the acquisition of a separate intangible asset? (1 Mark) 16. Why is the probability criterion always considered to be satisfied when accounting for the acquisition of a separate intangible asset...
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...Introduction A study conducted by an independent accounting firm revealed that intangible assets account for 80% of the S&P 500’s total value (Nearon, 2008). This study researched United States (US) companies’ and indicated 40% of market value is not reflected in their balance sheet (Nearon, 2008). This decline in market value has led to strong arguments for rethinking the measurement and treatment for intangibles assets. International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) have created significant differences in the accounting treatment of intangible assets. Both IFRS and GAAP view intangible assets as a non-monetary asset that do not have physical substance but can be identified. This paper will review the similarities and differences within GAAP and IFRS regarding the following: intangible asset impairments, research and development (R&D), advertising cost, and goodwill impairment. Intangible Asset Impairment Testing IFRS and GAAP contain similar indicators for testing impairment of intangible assets. Differences arise in testing, recognition and presentation. GAAP requires a two-step impairment test for intangible assets. Step one requires companies to determine if the carrying amount of the assets exceeds undiscounted future cash flows. If it meets this requirement, step two can be used to calculate the necessary impairment loss. An impairment loss is measured as the difference between the carrying amount...
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...assets broken up into two categories - 'Property, Plant, and Equipment' (PP&E) and 'Intangible Assets'. PP&E often contains such non-current assets as land and buildings, motor vehicles, office equipment, computers, and plant and machinery. Intangible Assets is a much broader category including anything from copyrights and patents to trade secrets, customer lists/leads, noncompetition agreements, franchises, and goodwill. The accounting methods for PP&E is very similar to those of Current Assets, though there are significant differences in the costs to be capitalized according to GAAP (the "generally accepted accounting princiapals" as determined by the Financial Accounting Standards Board, or FASB). Accounting for Intangible assets can be much more difficult, though – often, there are different rules for amortization, valuation, and estimation. For instance, there is much more uncertainty associated with intangible assets, so it’s much more difficult to account for the projected future benefits. According to the Spiceland text, “it’s often very difficult to anticipate the timing, and even the existence, of future benefits attributable to many intangible assets…in fact, this uncertainty is a discrimintating characteristic of intangible assets that perhaps better distinguishes them from tangible assets than their lack of physical subtance,” (Spiceland, Sepe & Nelson, 2011). Intangible assets with lives that have a foreseeable end are amortized, whereas ones with indefinite...
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...of Calcutta.) A Survey on Accounting & Reporting of Intangible Assets in some selected Indian companies Submitted by Name: MAITREYEE MUKHERJEE Registration no: 043-1221-0272-10 Roll no: Name of the college: Heramba Chandra College. Supervised by Name of the supervisor: JAYANTA GHOSH Name of the college: Heramba Chandra College. BACKGROUND: In 1494, a mathematically minded Veteran monk named Luca Pacioli published his “Summa de Arithmetica, Geometrica”, the first accounting textbook. It illustrated double-entry accounting, a system that makes the modern corporation manageable, even possible. Today, half a millennium later, Pacioli’s process, still pretty much intact, is being challenged like never before. Pacioli’s accounting system lets businesses keep track of changes in their assets. But this system deals primarily with tangible assets such as cash, inventory, investments, receivables, property, plant, and equipment. What go unrecorded are intangible assets such as quality of management, customer loyalty, information infrastructure, trade secrets, patents, goodwill, research, and, considered by some, the ultimate intangible, knowledge—a company’s intellectual capital. FASB chairman Edmund...
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...Assignment on Intangible assets: Intangible assets are assets that lack physical existence and are not financial instruments. Intangible assets are usually classified as concurrent (long-term) assets because they produce benefits over several years. They are valuable because they provide rights and privileges to their owners. Examples of intangible assets are: trademarks, copyrights, patents, franchises, customer lists, and goodwill. Intangible assets have the following classifications: 1. Purchased vs. internally created intangibles 2. Limited-life vs. indefinite-life intangibles ← Purchased intangibles are recorded at the cost incurred to purchase an intangible asset from another entity, which includes the acquisition costs as well as expenditures made to get the asset ready for its intended use (e.g. legal fees). ← Internally created intangibles are often not recorded on the balance sheet: most costs incurred to internally develop an intangible asset have to be expensed (including Research and Development costs), and only certain costs (e.g. legal costs) might be capitalized (e.g. debit Patent for the cost of defending the patent). ← Limited-life intangibles are intangible assets with a limited useful life (e.g. copyrights, patents). Limited-life intangibles are systemically amortized throughout the useful life of the intangible asset using either units of activity method or straight-line method. The amortization amount equals the different between...
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...differences are so major that it keeps a consistent debate on which system is more appropriate for accounting purposes. The reporting of intangible assets is one such area where they are some similarities in using the guidelines of iGAAP or U.S. GAAP but they also have some significant differences between the two with respect to accounting for intangible assets. The system differences are so major that it quite constantly rises up debates. "It is unlikely that this debate will cease since the fair value accounting practices are endorsed both by the Financial Accounting Standard Board (FASB) and International Accounting Standard Board (IASB)." (Uzma, 2001 pg. 28-38) Intangible assets are considered to be corporate intellectual property which includes patents, copyrights, trademarks, trade names, franchise licenses, government licenses and goodwill. The main characteristics of intangible assets are that they are not of physical existence and they are not monetary instruments, but they are classified as long-term assets and provide long-term benefits. Intangible assets are presented in the balance sheet as value holding and/or cash generating patents, trademarks, licenses, copyrights, etc. Certain companies in certain industries such as music, drug and consumer products industries find it vitally important to report intangible assets. There are four major similarities in U.S. GAAP and iGAAP in accounting for...
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...Intangibles LEAD 6100 Measurement Concepts & Analysis January 24th, 2016 The first intangible I have chosen is determining the impact of using co-branded graphics, printing of the Toyota and Lexus logos on all service part packaging. How does it impact our customers? Are the customers aware that Lexus is the luxury division of Toyota? Do the co-branded graphics hinder or prevent grey/black market part sales? As for the method I suggest using random sampling from Toyota dealerships throughout the network for determining customer awareness of Lexus affiliation with Toyota. In regards to the grey/black market parts sales I am thinking of tracking the number of incidents since the implementation of the graphics to see if there is any fluctuation. Based on data from our legal department has there been any increases or decreases in identifying grey/black market sales since the packaging change was implemented. If so, were any of the new packaging specs involved? The second intangible that I selected is determining the value of a packaging spec paten. How does an organization like Toyota determine the value of a patented packaging spec? The patented packaging design has been proven to be successful with protecting the part(s) thus reducing damage claims. So in theory the dollar amount of damage claims prior to implementing the packaging spec could be used as a baseline. For example if damage dollars were equivalent to $100,000 and after the packaging spec...
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...estimated at $70 bil- lion. Where is the value of its customer base? It's the satisfied customers who repeatedly purchase from the firm who constitute a major asset. Where is employee value? Having better employees than the competi- tion will spell the difference between having superior profits and aver- age profits. Where is partners value? Loyal suppliers and distributors can make a company, and disloyal ones can break a company. Where is knowledge and intellectual capital value? Patents, copyrights, trade- marks, and licenses can be one of the company's major assets. No wonder there is often a huge gap between a company's mar- ket capitalization and its book value. The gap reflects the value of the intangibles. For example, AmericaOnline's book value in 1999 was only 3.3 percent of its market capitalization. Thus 97 percent of AOL's value was not on the balance sheet. Companies would be wise if they start identifying and assessing all their marketing assets such as their brands, customer relationships, employee relationships, channel relationships, supplier relationships, and intellectual capital. The company should choose marketing activ- ities that build the value of their market-based assets. Should your company even consider owning physical assets? Own- ing physical property can be a liability. All a company needs is access to physical assets. To operate as a lean company...
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...AN EXAMINATION OF INVENTORY COSTING CONVERGENCE UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND INTERNATIONAL FINANCIAL REPORTING STANDARDS Casey Reineking Department of Accounting Murray State University Murray, KY 42071-3314 E-mail: casey.reineking@hotmail.com Don H. Chamberlain Department of Accounting Murray State University Murray, KY 42071-3314 Holly R. Rudolph Department of Accounting Murray State University Murray, KY 42071-3314 L. Murphy Smith* Department of Accounting Murray State University 351 Business Building Murray, KY 42071-3314 Tel: 270-809-4297 Email: msmith93@murraystate.edu *Corresponding author Forthcoming in Journal of International Business Research AN EXAMINATION OF INVENTORY COSTING CONVERGENCE UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND INTERNATIONAL FINANCIAL REPORTING STANDARDS ABSTRACT Accounting principles in the United States are converging toward international standards. If convergence continues, and there are proponents and detractors, then the U.S. system of accounting, called Generally Accepted Accounting Principles (GAAP), will eventually be replaced by International Financial Reporting Standards (IFRS). Convergence has profound implications for publicly traded companies and their many stakeholders such as investors, lenders, government agencies, and employees. A key issue facing accounting standard-setters is the treatment of inventory costing, an area in which GAAP and IFRS differ. This study addresses three...
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...Intangible assets- practical approach An asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today's marketplace. An intangible asset can be classified as either indefinite or definite depending on the specifics of that asset. A company brand name is considered to be an indefinite asset, as it stays with the company as long as the company continues operations. However, if a company enters a legal agreement to operate under another company's patent, with no plans of extending the agreement, it would have a limited life and would be classified as a definite asset. While intangible assets don't have the obvious physical value of a factory or equipment, they can prove very valuable for a firm and can be critical to its long-term success or failure. During the past years, attention was brought to companies that are based only on intangibles, such a company is Amazon but also big companies that relied mostly on manufacturing goods, started paying more attention to intangibles. Oracle is an American multinational computer technology corporation headquartered in Redwood City, California, United States. The company specializes in developing and marketing computer hardware systems and enterprise software products – particularly its own brands of database management systems. Oracle is the third-largest software maker by revenue...
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...Intangible Assets A. Classification--intangible assets are assets that derive their value from the rights and privileges granted to their owner, are long-term in nature, and lack physical substance B. Valuation 1. Cost--cost is the cash or cash equivalent price of obtaining the intangible asset and making it ready for its intended use a. Purchased Intangibles--the cost of a purchased intangible asset is determined in essentially the same way as the cost of property, plant, and equipment b. Internally-created Intangibles--the cost of an internally-created intangible asset includes only the direct costs incurred in obtaining the intangible asset, such as legal fees, registration fees, etc. 1) Research and Development Costs--all research and development costs are expensed when incurred 2. Special Considerations a. Marketing-related Intangible Assets--marketing-related intangible assets are those intangible assets that are used in the marketing or promotion of products or services (such as trademarks or trade names, newspaper mastheads, internet domain names, and noncompetition agreements) 1) Purchased Intangibles--the capitalizable cost of a purchased marketing-related intangible asset is its purchase price plus any...
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...IAS 38 Intangible Assets outlines the accounting treatments for intangible assets. An intangible asset is defined as identifiable non-monetary asset that has no physical form which is controlled by the entity and is expected to generate future economic benefits (Jaroslav and Alois, n.d.) . The definition of assets has identified 3 key characteristics. Firstly, the intangible asset has to be identifiable. The controlled airspace met the identifiable criterion as it arises from legal rights. According to Gray (n.d.), airspace should be a free territory and has a status of ‘no-man's land’. However, CAA has been given the rights by the federal government to undertake all aviation related functions. CAA issue license which the aircraft must have to pay for the license in order to utilize the airspace. Secondly, an intangible asset has to provide future economic benefits, which mean there should be cash flow whether directly or indirectly, to the entity. To achieve this goal, the entity has to employ its assets to produce goods and service to create value and benefits in order to satisfy customers’ needs and wants. The controlled airspace (CAS) established has value that is able to satisfy the needs and wants of customers as the purpose of CAS is to protect the aircraft during various phases of flight. It provides efficient flow of traffic besides facilitate a safe flight (Civil Aviation Authority, n.d.). According to Civil Aviation Authority (n.d.), the aircraft must be in receipt...
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