Choice of cost or revaluation model

Learning objectives

• Identify the two measurement models after recognition and the rule that the model is applied by class.L1, L2

Normative references

• IAS 38 §72Choice of the cost model or the revaluation model as accounting policy; under the revaluation model, all the assets in the class are revalued unless there is no active market for them.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

18 questions

• A transport entity elects the revaluation model for one of its route operating licences, which are traded on an active market. What follows for the other licences in the same class?L1
• True or false? After initial recognition, an entity chooses either the cost model or the revaluation model as its accounting policy for measuring its intangible assets.L1
• True or false? A taxi company may revalue only its most valuable licence and keep at cost its other licences of the same class, all of which are traded on an active market.L1
• True or false? In a class of intangible assets measured using the revaluation model, an asset for which there is no active market is carried at its cost less accumulated amortisation and impairment losses.L2
• True or false? An entity may apply the cost model to its class of patents and the revaluation model to its class of transport licences, which are traded on an active market.L2
• Between which measurement models does an entity choose for its intangible assets after initial recognition?L1
• An entity adopts the revaluation model for a class of intangible assets. By reference to what is the fair value of these assets determined?L1
• Pescalia, a fishing company, holds a class of fishing quotas, all traded on an active market except one quota for a rare species, which is never traded. Pescalia adopts the revaluation model for this class. How is the rare-species quota measured?L2
• Cerdane group holds two classes of intangible assets: industrial patents, for which there is no active market, and taxi licences, traded on an active market. The CFO wishes to move to the revaluation model for all its intangible assets. Which analysis is correct?L2
• Which of the following statements on the choice of measurement model for intangible assets are correct? More than one answer may be correct.L1
• Lactavia, a cooperative, holds a class of milk production quotas, almost all traded on an active market, and a separate class of software. It is considering adopting the revaluation model for its quotas. Which statements are correct? More than one answer may be correct.L2
• Ondéa, a broadcaster, measures its class of broadcasting licences using the revaluation model. It acquires a new licence in the same class, traded on an active market. How is this licence measured after initial recognition?L2
• True or false? The cost model is reserved for internally generated intangible assets; acquired intangible assets must be revalued.L1
• Agri-Quotas Ouest has opted for the revaluation model for its class of production quotas, most of which are traded on an active market. Which of the following statements are correct?L4
• At 31 December 20X2, Armement Kerdual revalues for the first time a transferable fishing licence acquired for {cost}, whose accumulated amortisation amounts to {accumulated_amortisation}. Its fair value, measured by reference to an active market, is {fair_value}. The entity eliminates the accumulated amortisation against the gross carrying amount of the asset. No decrease in value has previously been recognised. The whole class of fishing licences to which this asset belongs, traded on that active market, is revalued at the same date. Ignore deferred tax effects. Calculate the revaluation surplus recognised in other comprehensive income and the gross carrying amount of the licence after revaluation.L3
• Transports Vallerin applies the revaluation model to its class of taxi licences, which are traded on an active market in the large cities where it operates. It has just acquired a licence in a small town where no licences are traded. The finance director proposes revaluing this licence on the basis of a present value of expected takings, calculated by an external firm, in order to keep the class uniform. Write a judgement memo on the measurement of this licence and on the disclosures.L4
• Taxis Bellerive apply the revaluation model for the first time to a taxi licence traded on an active market. This licence, bought for {cost}, is amortised: its accumulated amortisation reaches {accumulated_amortisation}, while the market values it at {fair_value}. Bellerive eliminates the accumulated amortisation against the gross carrying amount. The licence has never suffered a decrease. The whole class of taxi licences to which this asset belongs, traded on that active market, is revalued at the same date. Ignore deferred tax effects. Record the single revaluation entry.L3
• Armement Kerlouan applies the revaluation model for the first time to a transferable individual fishing quota, amortised over its finite useful life. The quota cost {cost} and its accumulated amortisation amounts to {accumulated_amortisation}. The active market values it at {fair_value}. The entity eliminates the accumulated amortisation against the gross carrying amount. The whole class of fishing quotas to which this asset belongs, traded on that active market, is revalued at the same date. Ignore deferred tax effects. Record the revaluation entry.L3