Which of the following statements concerning patents is
(a) Costs incurred in connection with securing a patent,
as well as attorney’s fees and other unrecovered costs of a successful
legal suit to protect the patent, can be capitalized as part of
patent costs. Therefore, answer (a) is correct because legal fees
and other costs incurred to successfully defend a patent should
be amortized along with the acquisition cost over the remaining
economic life of the patent. Answer (b) is incorrect because legal
fees and other direct costs incurred in registering a patent should
be capitalized and amortized on a straight-line basis over its economic
life, not five years. Answers (c) and (d) are incorrect because
research and development costs related to the development
of the product, process or idea that is subsequently
patented must be expensed as incurred, not capitalized and amortized.
Under ASC Topic 350, goodwill should be tested periodically
(d) Goodwill is allocated to reporting units which are
operating segments of the business or one level below. Goodwill
is also tested for impairment at the level of the reporting unit.
Sloan Corporation is performing its annual test of the impairment
of goodwill for its Financing reporting unit. It has determined
that the fair value of the unit exceeds it carrying value.
Which of the following is correct concerning this test of impairment?
(a) There are two steps in the test of impairment of
goodwill. The first is to compare the carrying value of the reporting
unit to its fair value. If the fair value exceeds the carrying
value there is no need to perform the second step of valuing the
unit’s assets and liabilities. Goodwill is never tested at the entity
Wilson Corporation is performing the test of impairment of
its Technology reporting unit at 9/30/Y4. In the first step of the
process, Wilson has valued the unit using a multiple of earnings
approach at $2,000,000. The carrying value of the net assets of
the Technology unit is $2,100,000. What should Wilson do with
(d) Since the fair value of the reporting unit is less than
its carrying amount, the second step in the test should be performed.
The assets and liabilities of the unit should be valued and compared to value of the total unit. The implied value of
goodwill is the difference. The impairment is equal to the difference
between the implied value and the carrying amount of the
Under IFRS, what valuation methods are used for intangible
(b) The requirement is to identify the acceptable valuation
methods for intangible assets. Answer (b) is correct because
under IFRS, intangible assets can be measured using either the
cost model or the revaluation model.
Under IFRS, an entity that acquires an intangible asset may
use the revaluation model for subsequent measurement only if
(b) The requirement is to identify the circumstances
that allow the entity to use the revaluation model. Answer (b) is
correct because the revaluation method can only be used if there
is an active market for the intangible asset.
Under IFRS, which of the following is a criterion that must
be met in order for an item to be recognized as an intangible asset
other than goodwill?
(d) The requirement is to identify the criterion that
must be met in order for an item to be recognized as an intangible
asset other than goodwill. Answer (d) is correct because the
asset must be identifiable and lack physical substance.
Under IFRS, intangible assets with indefinite lives are
tested for impairment
(b) The requirement is to identify the rule regarding
testing intangible assets with indefinite lives for impairment under
IFRS. Answer (b) is correct because intangible assets with
indefinite lives must be tested for impairment annually at the
annual reporting date
Under IFRS, an intangible asset is considered to be impaired
if its carrying value is greater than its recoverable amount.
The recoverable amount is
(c) The requirement is to identify the definition of
recoverable amount under IFRS. Answer (c) is correct because
recoverable amount is defined as the greater of net selling price or
value in use.