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Professional fileIAS 38L4 · Expert

Professional file: year-end close of the intangible assets of a software publisher

15 documents18 tasks≈ 240 min
0 / 27 items completed
Standards
IAS 38 — Intangible Assets
Assistance levelFree workspace · autonomous situation
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: withdrawn

Case brief

Situation

Logiciels Boréal (a fictitious company) publishes mapping software. It closes its accounts on 31 December and applies the cost model to all its intangible assets. During 20X2 it acquired the licence of a rendering engine, the Orion licence, developed an online module internally, the Atlas project, and sold an old licence, the Delta licence. It also holds an acquired trademark, Boréal Maps, regarded as having an indefinite useful life, and a support platform licence, the Gamma licence. You are in charge of the 20X2 year-end file: workpapers, proposed entries, review of the draft note, answers to the reviewer's notes and conclusion of the file.

Your assignment

The file contains documents of varying nature and reliability, some of which have no effect, a management proposal to assess, a draft note to reconcile and a missing piece of information obtained during the engagement. Determine the cost of the Orion licence and its amortisation, the treatment of the Atlas project, the charges for the year, the test of the trademark, the gain or loss on the sale of the Delta licence, the entries and their impact, then reconcile the note; document each judgment, answer the reviewer's notes and conclude on the file.

You prepare a complete file: documents, work, entries and conclusion, then compare your work with the solution and the review points of the file.

Autonomous professional situation

As on a real engagement: no method, no checklist and no hints. You identify the issues yourself, organise the work and defend your conclusion.

  • Organise the work
  • Document each point
  • Argue the conclusion

Events

Chronology of the file

  1. March 1 20X2Signature date of the Orion agreement · Dated fact of the file

    Document 2

  2. March 28 20X2Date the financing was granted · Dated fact of the file

    Document 8

  3. April 1 20X2Date capable of operating as intended · Date the criteria are demonstrated · Dated fact of the file

    Document 4 · Document 6

  4. June 30 20X2Sale date of the Delta licence · Dated fact of the file

    Document 12

  5. December 1 20X2Date the Atlas module is available · Dated fact of the file

    Document 6

Documents

File documents

15 documents: open each one to read it.

Document 1Memo

Internal engagement letter

Internal engagement letter: preparation of the 20X2 year-end file for intangible assets. Cost model for all classes. Classes presented in the notes: acquired licences, internally developed software, trademarks.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Signature date of the Orion agreementMarch 1 20X2
List price of the Orion licence€250,000.00
Trade discount€10,000.00
Term of the Orion licence rights4 years
Recoverable VAT€48,000.00
Total payable to the licensor€288,000.00
Integration and configuration€20,000.00
Functionality tests€10,000.00
Date capable of operating as intendedApril 1 20X2
Share of expected revenue in 20X210%
Date the criteria are demonstratedApril 1 20X2
Date the Atlas module is availableDecember 1 20X2
Useful life of the Atlas module5 years
20X1 studies expensed€80,000.00
20X2 research: internal staff€50,000.00
Development before the criteria: external services€30,000.00
Development after the criteria: staff€180,000.00
Development after the criteria: external services€60,000.00
Allocated head-office overheads€25,000.00
Date the financing was grantedMarch 28 20X2
Cost of the Boréal Maps trademark€400,000.00
Cost of the Delta licence€120,000.00
Useful life of the Delta licence6 years
Accumulated amortisation of the Delta licence at the beginning of the year€40,000.00
Carrying amount of the Gamma licence at the beginning of the year€120,000.00
Carrying amount of acquired licences at the beginning of the year€200,000.00
Carrying amount of acquired licences at year-end (trial balance)€299,375.00
Remaining useful life of the Gamma licence3 years
Recoverable amount of the trademark€340,000.00
Sale date of the Delta licenceJune 30 20X2
Sale price€85,000.00
Broker's fees€3,000.00
Charge shown in the draft note€90,625.00
Closing amount shown in the draft note€309,375.00
Annual office rent€36,000.00
Annual insurance premium€4,500.00

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 sort15

  • Internal engagement letter

  • Orion licence agreement

  • Licensor's invoice

  • Integrator's invoice and acceptance report

  • Memo from the finance department

  • Minutes of the Atlas committee

  • Statement of the Atlas project costs

  • Letter from the bank

  • Fixed asset register

  • Useful life review

  • Valuation report on the trademark

  • Deed of sale of the Delta licence

  • Draft note

  • Amendment to the office lease

  • Cyber-risk insurance proposal

Relevant to the treatment0

    No effect0

      Workspace

      Work programme

      Organise your work freely: deal with each point, then argue your conclusion.

      1. Task 1Analysis

        Analyse the file: which accounting questions arise, which documents are useful and which information is missing?

      2. Task 2Calculation

        Calculate the cost of the Orion licence.

        Calculator

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

        Part 1 · Calculation

        Calculate the cost of the Orion licence.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Cost of the Orion licence

      3. Task 3Journal entries

        Which acquisition entry do you record?

        Calculator

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

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        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

      4. Task 4Professional judgement

        Which useful life and amortisation method do you retain for the Orion licence? Answer management's proposal.

        Calculator

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

        Part 1 · Calculation

        Which useful life and amortisation method do you retain for the Orion licence? Answer management's proposal.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Calculation

        Calculate the 20X2 charge for the Orion licence.

        Calculator

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

        Part 1 · Calculation

        Calculate the 20X2 charge for the Orion licence.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Professional judgement

        From which date are the Atlas project costs capitalised?

      7. Task 7Calculation

        Calculate the capitalised cost of the Atlas module and the R&D expensed in the year.

        Calculator

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

        Part 1 · Calculation

        Calculate the capitalised cost of the Atlas module and the R&D expensed in the year.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Capitalised cost of the Atlas module

      8. Task 8Journal entries

        Which entries do you record for the Atlas project?

        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

        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

        3. Line 3

        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

      9. Task 9Calculation

        Calculate the 20X2 charges for the Atlas module and the Delta licence.

        Calculator

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

        Part 1 · Calculation

        Calculate the 20X2 charges for the Atlas module and the Delta licence.

        1. €
        2. €
        3. €
        4. €

        Checks

        • 0 / 4 steps entered
        • Amounts readable

        Result: 20X2 charge for the Delta licence up to the sale

      10. Task 10Calculation

        Calculate the 20X2 charge for the Gamma licence.

        Calculator

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

        Part 1 · Calculation

        Calculate the 20X2 charge for the Gamma licence.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      11. Task 11Journal entries

        Which amortisation entries do you record for 20X2?

        Calculator

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

        Part 1 · Journal entry · Journal entries

        Entry 1 of 4

        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 2 · Journal entry · Journal entries

        Entry 2 of 4

        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 4

        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 4 · Journal entry · Journal entries

        Entry 4 of 4

        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

      12. Task 12Professional judgement

        Is the indefinite life of the trademark still supported and how is the trademark tested?

      13. Task 13Calculation

        Calculate the impairment loss on the trademark.

        Calculator

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

        Part 1 · Calculation

        Calculate the impairment loss on the trademark.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      14. Task 14Calculation

        Calculate the gain or loss on the sale of the Delta licence.

        Calculator

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

        Part 1 · Calculation

        Calculate the gain or loss on the sale of the Delta licence.

        1. €
        2. €
        3. €
        4. €

        Checks

        • 0 / 4 steps entered
        • Amounts readable

        Result: Gain on the sale of the Delta licence

      15. Task 15Journal entries

        Which impairment and sale entries do you record?

        Calculator

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

        Part 1 · Journal entry · Journal entries

        Entry 1 of 2

        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 2 · Journal entry · Journal entries

        Entry 2 of 2

        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

      16. Task 16Effects on the financial statements

        What is the impact of the year's entries on the financial statements?

        Part 1 · Classification · Analysis

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

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Equity

        4. Other comprehensive income

        5. Notes

        Calculator

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

        Part 2 · 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

      17. Task 17Calculation

        Reconcile the note on acquired licences and check the disclosures.

        Calculator

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

        Part 1 · Calculation

        Reconcile the note on acquired licences and check the disclosures.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Rebuilt closing carrying amount of acquired licences

      18. Task 18Conclusion

        Write the conclusion of the file.

      File review

      Points raised during the review of this file: read them as the preparer would.

      Review notes

      • BlockingResolvedBlocking note: the Orion charge follows revenue without rebutting the presumption; to be supported or corrected.
      • BlockingResolvedBlocking note: the draft note does not agree to the trial balance and omits required information.
      • Non-blockingOpenNon-blocking note: the calculation of the recoverable amount falls under IAS 36 and was not reviewed in this file.

      Information requests

      • ObtainedRequest to treasury: date the financing of the Atlas project was confirmed.
      • Assumption documentedRequest to the project manager: time spent by internal staff on integrating Orion.

      Completion checklist

      • Workpapers completed and agreed to the documents.Done
      • Entries proposed, balanced and agreed to the workpapers.Done
      • Reviewer's blocking notes resolved.Done
      • Note agreed to the trial balance.Done
      • Normative references checked against the official text.To review
      • Revaluation of intangible assets (model not applied).Not applicable

      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 / 27).

      Document this file

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

      Normative references

      • IAS 38 §27
      • IAS 38 §28
      • IAS 38 §52
      • IAS 38 §57
      • IAS 38 §65
      • IAS 38 §66
      • IAS 38 §67
      • IAS 38 §71
      • IAS 38 §88
      • IAS 38 §90
      • IAS 38 §94
      • IAS 38 §97
      • IAS 38 §98
      • IAS 38 §98A
      • IAS 38 §98B
      • IAS 38 §98C
      • IAS 38 §104
      • IAS 38 §107
      • IAS 38 §108
      • IAS 38 §109
      • IAS 38 §111
      • IAS 38 §113
      • IAS 38 §118
      • IAS 38 §126
      • IAS 38 §127
      • IAS 8 §36