Intangible Assets
2. Intangible Assets
Trademarks Goodwill Total
R’000 R’000 R’000
At 1 April 2006 Cost 50,500 287,444 337,944 Accumulated amortisation and impairment (50,096)
-- (50,096)
Net book amount
Year ended 31 March 2007 Opening net book amount
Amortisation charge
Closing net book amount
-- 287,444 287,444
At 31 March 2007 Cost 50,500 287,444 337,944 Accumulated amortisation and impairment (50,500)
-- (50,500)
Net book amount
Trademarks comprise Farmer Brown, Bonny Bird, Farm Fare and Epol, all of which were ac- quired on acquisition of Bonny Bird Farms (Proprietary) Limited and Epol (Proprietary) Limited in 1991.
2007 2006 R’000 R’000
Finite life/indefinite life
Finite life
Finite life
Amortisation period
15 years
15 years
Method of amortisation
Straight-line Straight-line
Is intangible title restricted in any way
No
No
Net book amount pledged as security
Nil
Nil
Amortisation of trademarks is included in administration expenses (refer to note 15).
Goodwill
Goodwill relates to the acquisition of Vector Logistics (Proprietary) Limited in 2005. The recov- erable amount of a cash-generating unit is determined based on value-inuse calculations. These cal- culations use cash flow projections based on financial budgets approved by management and future periods based on estimated growth rates. Cash flows beyond a five-year period are extrapolated using the estimated growth rates stated below.
Key assumptions used in the goodwill impairment test:
Discount rate (%)
Perpetuity growth rate (%)
Period (years)
No impairment was required in the current year or prior year. Sensitivity analysis of assumptions used in the goodwill impairment test: Assumption
Discount rate (%)
Movement +5 +5 Impairment Nil Nil
Perpetuity growth rate (%)
Movement -5 -5 Impairment Nil Nil
344 Wiley IFRS: Practical Implementation Guide and Workbook
MULTIPLE-CHOICE QUESTIONS
1. A newly set up dot-com entity has engaged you as its financial advisor. The entity has recently com- pleted one of its highly publicized research and de- velopment projects and seeks your advice on the accuracy of the following statements made by one of its stakeholders. Which one is it?
(a) Costs incurred during the “research phase” can be capitalized. (b) Costs incurred during the “development phase” can be capitalized if criteria such as technical feasibility of the project being es- tablished are met.
(c) Training costs of technicians used in re- search can be capitalized. (d) Designing of jigs and tools qualify as re- search activities.
Answer: (b)
2. Which item listed below does not qualify as an intangible asset? (a) Computer software. (b) Registered patent. (c) Copyrights that are protected. (d) Notebook computer.
Answer: (d)
3. Which of the following items qualify as an intan- gible asset under IAS 38? (a) Advertising and promotion on the launch of a huge product. (b) College tuition fees paid to employees who decide to enroll in an executive M.B.A. pro- gram at Harvard University while working with the company.
(c) Operating losses during the initial stages of the project. (d) Legal costs paid to intellectual property law- yers to register a patent.
Answer: (d)
4. Once recognized, intangible assets can be carried at (a) Cost less accumulated depreciation. (b) Cost less accumulated depreciation and less
accumulated amortization. (c) Revalued amount less accumulated de- preciation. (d) Cost plus a notional increase in fair value since the intangible asset is acquired.
Answer: (b) 5. Which of the following disclosures is not
required by IAS 38? (a) Useful lives of the intangible assets. (b) Reconciliation of carrying amount at the be-
ginning and the end of the year. (c) Contractual commitments for the acquisition of intangible assets. (d) Fair value of similar intangible assets used by its competitors.
Answer: (d)