IND AS 103: Accounting Standards Quiz
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Questions and Answers

What is the primary topic of discussion?

  • IND AS 102 (correct)
  • IND AS 103
  • IND AS 101
  • IND AS 104

    • How often should the residual value of an intangible asset be reviewed?

  • Only when the asset is disposed
  • At the end of every five years
  • At the end of every quarter
  • At the end of every year (correct)

    • What happens when the residual value of an intangible asset increases to an amount equal to or greater than its carrying amount?

  • The asset's useful life is reassessed
  • The asset is immediately derecognised
  • The asset should be amortized more rapidly
  • The asset should not be amortized until the residual value decreases to below the carrying amount (correct)

    • How is the difference between the consideration and the carrying amount of an intangible asset treated?

    <p>As a gain or loss, recognised in the P&amp;L statement</p> Signup and view all the answers

    What standard is used to determine whether an intangible asset is impaired?

    <p>Ind AS 36</p> Signup and view all the answers

    How is an intangible asset carried when it is retired from active use and held for disposal?

    <p>At its carrying amount at the date of retirement</p> Signup and view all the answers

    What happens to subsequent changes to the estimated consideration of an intangible asset?

    <p>They are accounted for as changes in transaction price as per Ind AS 115</p> Signup and view all the answers

    Where should gains from the disposal of an intangible asset be classified?

    <p>Other income</p> Signup and view all the answers

    When is an intangible asset derecognised from the balance sheet?

    <p>On disposal or when no future economic benefits are expected from its use or disposal</p> Signup and view all the answers

    What is the cost of material and services consumed in generating an intangible asset considered as?

    <p>Direct cost</p> Signup and view all the answers

    Which of the following costs should NOT be capitalised for an intangible asset?

    <p>Selling overheads</p> Signup and view all the answers

    According to Ind AS 103, how is the cost of an intangible asset determined in a business combination?

    <p>Fair value at the acquisition date</p> Signup and view all the answers

    What is the condition for an intangible asset to be recognised?

    <p>All of the above</p> Signup and view all the answers

    Which of the following costs are directly related to generating an intangible asset?

    <p>All overheads allocated on a reasonable and consistent basis</p> Signup and view all the answers

    What is the treatment of abnormal loss of material, labour or other inefficiencies?

    <p>Charge it to profit and loss</p> Signup and view all the answers

    What is the cost of an intangible asset that is acquired in a business combination?

    <p>Fair value at the acquisition date</p> Signup and view all the answers

    Why are administration overheads not capitalised as part of the cost of an intangible asset?

    <p>They are not directly related to generating the asset</p> Signup and view all the answers

    What is the estimated present value of future cost savings over the four-year period?

    <p>₹ 9,60,000</p> Signup and view all the answers

    What is the likely accounting treatment for the new process, considering Neha's concerns?

    <p>Record the new process as an intangible asset with a useful life of four years</p> Signup and view all the answers

    Can the cost incurred to obtain the right regarding the player be recognized as an intangible asset as per Ind AS 38?

    <p>Yes, as it is a contractual right</p> Signup and view all the answers

    What is the main reason why Neha is concerned about the new process?

    <p>The uncertainty of its future benefits after four years</p> Signup and view all the answers

    What is the estimated useful life of the new process, according to Neha?

    <p>Four years</p> Signup and view all the answers

    What is the main factor that determines the price the entity paid to acquire the right regarding the player?

    <p>The player's skills and fame</p> Signup and view all the answers

    Study Notes

    Intangible Assets

    • Estimations of intangible assets are made using prices prevailing at the date of acquisition.
    • Residual value should be reviewed at least annually and changes are accounted for prospectively.
    • If residual value increases to an amount equal to or greater than carrying amount, amortization is suspended until the residual value decreases below the carrying amount.

    Retirement and Disposal

    • An intangible asset is derecognized from the balance sheet on disposal or when no future economic benefits are expected.
    • The difference between the consideration and the carrying amount is treated as gain or loss and recognized in the P&L statement.
    • The consideration received or receivable is the transaction price as per Ind AS 115.
    • Subsequent changes to the estimated consideration are accounted for as changes in transaction price.
    • Gains are not classified as "Revenue from operations" but are part of "other income".

    Impairment

    • An intangible asset is impaired if its recoverable amount is less than the carrying amount.
    • Determination of impairment is done using Ind AS 36.

    Cost of Intangible Assets

    • Cost includes:
      • Cost of material/services consumed in generation of intangible asset
      • Salaries, wages, and other employment benefits paid to personnel engaged in development
      • Directly related overheads allocated on a reasonable and consistent basis
      • Directly related costs like registration fees, amortization of patents, etc.
      • Capitalized borrowing costs as per Ind AS 23
    • The following costs are not capitalized:
      • Selling overheads
      • Administration overheads (unless directly related to generating the asset)
      • Abnormal loss of material, labor, or inefficiencies
      • Initial operating losses
      • Training costs to operate the asset

    Business Combinations

    • As per Ind AS 103, the cost of an intangible asset acquired in a business combination is its fair value at the acquisition date.
    • The intangible asset should satisfy the recognition criteria, i.e., it is separable or arises from contractual or other legal rights, and sufficient information exists to measure reliably.

    Specific Scenarios

    • If an intangible asset has a limited life, its estimated useful life should be considered.
    • The cost incurred to obtain a right, such as a player's contract, can be recognized as an intangible asset if it meets the recognition criteria.

    Intangible Assets

    • Estimations of intangible assets are made using prices prevailing at the date of acquisition.
    • Residual value should be reviewed at least at the end of every year and changes should be considered as changes in estimate and accounted for prospectively.
    • If residual value increases to an amount equal to or greater than carrying amount, the asset should not be amortised till the residual value decreases to below the carrying amount.

    Retirement and Disposal

    • An intangible asset should be derecognised from the balance sheet on disposal or when no future economic benefits are expected from its use or disposal.
    • The difference between the consideration and the carrying amount of the asset should be treated as gain or loss and recognised as income or expense in P&L statement.
    • The consideration received or receivable is the transaction price as per Ind AS 115.
    • Any subsequent changes to the estimated consideration should be accounted as changes in transaction price as per Ind AS 115.
    • Gains should not be classified as "Revenue from operations" and should be part of 'other income'.
    • An intangible asset retired from active use and held for disposal should be carried at its carrying amount at the date when the asset is retired from active use as per Ind AS 105.

    Impairment

    • An intangible asset is impaired if its recoverable amount is less than the carrying amount, as per Ind AS 36.
    • To determine impairment, an entity applies Ind AS 36.

    Case Study

    • If the present value of future cost savings is estimated to be ` 9,60,000 over a period of 4 years, the asset should be accounted for accordingly.

    Intangible Asset Recognition

    • A cost incurred to obtain the right regarding a player can be recognised as an intangible asset as per Ind AS 38 if the entity uses and develops the player through participation in matches and the right is derived from the skills and fame of the player.

    Cost of Intangible Asset

    • The cost of an intangible asset includes cost of material/services consumed, salaries, wages and other employment benefits, overheads, registration fees, amortisation of patents, and borrowing costs that can be capitalised as per Ind AS 23.
    • The following costs should not be capitalised: selling overheads, administration overheads, abnormal loss of material, labour or any other inefficiencies, initial operating losses, and training costs to operate the asset.

    Business Combinations

    • In a business combination, the cost of an intangible asset is its fair value at the acquisition date, as per Ind AS 103.
    • The intangible asset should satisfy the recognition criteria, i.e., it is separable or arises from contractual or other legal rights, and sufficient information exists to measure reliably.

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    Assess your knowledge of Indian Accounting Standards with this quiz, covering topics related to IND AS 103. Test your understanding of financial reporting and accounting principles.

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