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AYB200/Weekly Tutorial Solutions/Week 5
S1, 2013
Assets 2 (Intangible Assets)
Based on Week 4 Due Week 5 (due 25th March)
NOTE: Provide references for your answers and quote where you have written something that is word-for-word from a source Textbook Questions (15 marks):
Challenging Question 29 (5 marks)
Applicability of AASB 138: A taxi licence would be considered to be an intangible asset and must be accounted for in accordance with AASB 138. Intangible assets can be carried at cost (less any accumulated amortisation and accumulated impairment losses) or at fair value by way of asset revaluations. However, intangible assets can only be revalued to fair value to the extent that there is an ‘active market’. If there is not an ‘active market’ then the intangible asset must be carried at cost. An active market is defined in AASB 138 as: ‘a market exhibiting all of the following: the items traded are homogeneous; willing buyers and sellers can normally be found; and prices are publicly available’.
According to AASB 138, an active market would not exist for most intangible assets because intangible assets are typically unique in nature. However, the market for taxi licenses would seem likely to satisfy the requirements associated with an ‘active market’ and hence revaluations to fair value would be permitted. In this regard paragraph 78 of AASB 138 states: It is uncommon for an active market with the characteristics described in paragraph 8 to exist for an intangible asset, although this may happen. For example, in some jurisdictions, an active market may exist for freely transferable taxi licences, fishing licences or production quotas. However, an active market cannot exist for brands, newspaper mastheads, music and film publishing rights, patents or trademarks, because each such asset is unique. Also, although intangible assets are bought and sold, contracts are negotiated between individual buyers and sellers, and transactions are
S1, 2013
Assets 2 (Intangible Assets)
Based on Week 4 Due Week 5 (due 25th March)
NOTE: Provide references for your answers and quote where you have written something that is word-for-word from a source Textbook Questions (15 marks):
Challenging Question 29 (5 marks)
Applicability of AASB 138: A taxi licence would be considered to be an intangible asset and must be accounted for in accordance with AASB 138. Intangible assets can be carried at cost (less any accumulated amortisation and accumulated impairment losses) or at fair value by way of asset revaluations. However, intangible assets can only be revalued to fair value to the extent that there is an ‘active market’. If there is not an ‘active market’ then the intangible asset must be carried at cost. An active market is defined in AASB 138 as: ‘a market exhibiting all of the following: the items traded are homogeneous; willing buyers and sellers can normally be found; and prices are publicly available’.
According to AASB 138, an active market would not exist for most intangible assets because intangible assets are typically unique in nature. However, the market for taxi licenses would seem likely to satisfy the requirements associated with an ‘active market’ and hence revaluations to fair value would be permitted. In this regard paragraph 78 of AASB 138 states: It is uncommon for an active market with the characteristics described in paragraph 8 to exist for an intangible asset, although this may happen. For example, in some jurisdictions, an active market may exist for freely transferable taxi licences, fishing licences or production quotas. However, an active market cannot exist for brands, newspaper mastheads, music and film publishing rights, patents or trademarks, because each such asset is unique. Also, although intangible assets are bought and sold, contracts are negotiated between individual buyers and sellers, and transactions are