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Practical case

Practical caseIAS 38L1 · Fundamental

Acquisition of a management software licence

3 documents7 tasks≈ 30 min
0 / 12 items completed
Standards
IAS 38 — Intangible Assets
Assistance levelFull guidance · strong assistance
  • Method: shown
  • Checklist: shown
  • Hints: shown
  • Step-by-step work: shown

Case brief

Situation

Transports Delmar (a fictitious company) runs delivery rounds and closes its accounts on 31 December. It applies the cost model to its intangible assets. In 20X1, it acquires from a vendor a perpetual licence for route optimisation software. You are asked to account for the acquisition from the documents below.

Your assignment

Using the vendor's invoice, the statement of project costs and the go-live memo, deal with the following points in order; each step builds on the previous one.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Fundamental level: the method, help and references are shown.

Method

  1. Read the brief and the assignment.
  2. Open each document and spot the relevant data.
  3. Carry out the work in the suggested order.
  4. Submit, then read the conclusion and the model answer.

File checklist

  • Open each piece (0 / 3 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 12) · to do
  • Submit the file, then assess yourself · to do

Events

Chronology of the file

  1. April 1 20X1Date available for use · Dated fact of the file

    Document 3

  2. July 1 20X1Date actual use starts · Dated fact of the file

    Document 3

Documents

File documents

3 documents: open each one to read it.

Document 1Invoice

Vendor's invoice

Invoice No. L-457 dated 10 February 20X1. Perpetual software licence, list price: 180,000. Trade discount of 10%: 18,000. Net price: 162,000. VAT: 32,400, fully recoverable. Total payable: 194,400, due in 45 days.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
List price€180,000.00
Trade discount€18,000.00
Net invoiced price€162,000.00
Recoverable VAT€32,400.00
Invoice total, payable to the vendor€194,400.00
Non-refundable registration duty€3,000.00
Configuration by the integrator€21,000.00
Tests of proper functioning€6,000.00
Fees of the go-live consultant€8,000.00
Training of the planners€7,000.00
Communication campaign to customers€4,000.00
General administrative overheads€2,000.00
Date available for useApril 1 20X1
Date actual use startsJuly 1 20X1
Useful life5 years
Residual value€0.00

Sorting the information

Not every document matters: identify those that affect the accounting treatment.

Part 1 · Classification · Analysis

Sort each document: does it affect the accounting treatment?

Drag each item into its category, or tap the category under the item.

To sort3

  • Vendor's invoice

  • Statement of other project costs

  • Go-live memo

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      7 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.

      1. Task 1Analysis

        Does the licence meet the definition of an intangible asset and the recognition criteria?

        Set out the facts, the question raised, then your analysis.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      2. Task 2Calculation

        Determine the cost of the licence and the total costs to be expensed.

        Start from the data in the pieces, set the formula, check the unit and the order of magnitude.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Determine the cost of the licence and the total costs to be expensed.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Costs recognised as an expense

      3. Task 3Calculation

        Calculate the annual amortisation charge.

        Start from the data in the pieces, set the formula, check the unit and the order of magnitude.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Calculate the annual amortisation charge.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Calculation

        From which date does amortisation start? Calculate the charge for 20X1.

        Start from the data in the pieces, set the formula, check the unit and the order of magnitude.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        From which date does amortisation start? Calculate the charge for 20X1.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Journal entries

        Which journal entries do you record in 20X1?

        Identify the accounts affected and the direction of each movement; check the balance.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 3

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        3. Line 3

        4. Line 4

        TotalsDebit0Credit0

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Journal entry · Journal entries

        Entry 2 of 3

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

        Calculator

        Click in an answer field to be able to insert the result.

        Part 3 · Journal entry · Journal entries

        Entry 3 of 3

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      6. Task 6Effects on the financial statements

        What is the impact of these entries on the financial statements at 31 December 20X1?

        For each financial statement, state the line affected, the direction and the amount.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        What is the impact of these entries on the financial statements at 31 December 20X1?

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

        Part 2 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        5. Notes

        Calculator

        Click in an answer field to be able to insert the result.

        Part 3 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      7. Task 7Conclusion

        Write the conclusion to be kept in the acquisition file.

        Write a conclusion that cites the facts and the treatment chosen.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 12).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IAS 38 §8
      • IAS 38 §18
      • IAS 38 §21
      • IAS 38 §27
      • IAS 38 §28
      • IAS 38 §29
      • IAS 38 §30
      • IAS 38 §97
      • IAS 38 §98