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The reconciliation of the carrying amount for intangible assets from the start of
the year to the end of the year required by IAS 38 is similar to that required for
property, plant and equipment in accordance with IAS 16 as follows:
Development
costs
Licences Total
Cost or valuation:
$000
$000
$000
Balance b/fwd
X
X
X
Additions X
X
X
Disposals (X)
(X)
(X)
––––
––––
––––
Balance c/fwd
X
X
X
––––
––––
––––
Accumulated depreciation:
X
X
X
Balance b/fwd
X
X
X
Charge for the year
(X)
(X)
(X)
––––
––––
––––
Disposals X
X
X
––––
––––
––––
Carrying amount 31 Dec 20X4
X
X
X
–––– ––––
––––
Carrying amount 31 Dec 20X3
X
X
X
––––
––––
––––
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Chapter summary
Intangible assets
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Test your understanding answers
Test your understanding 1
Statement of profit or loss
Amortisation $2,000
($20,0000/10 years)
Intangible assets
$18,000
($20,000 – $2,000)
Test your understanding 2
The correct answer is C
Both 1 and 3 involve researching materials, without any form of
commercial production in mind.
Test your understanding 3
The correct answer is D
Amortisation will be charged on a straight-line basis for each of the five
years that revenue is generated.
Therefore the amortisation charge for each of the years ended
31 December 20X6 – 20Y0 will be:
$250,000/5 years = $50,000
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Accruals and
prepayments
Chapter learning objectives
Upon completion of this chapter you will be able to:
•
understand how the matching concept applies to accruals
and prepayments
•
identify and calculate adjustments relating to accruals and
prepayments
•
record the appropriate adjustments for accruals and
prepayments in the ledger accounts
•
understand the impact of accruals and prepayments on profit
and net assets.
Chapter
10
PER
One of the PER performance objectives (PO6)
is to record and process transactions and
events. Working through this chapter should
help you understand how to demonstrate that
objective.
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1 Overview
Introduction
This chapter considers the accruals basis of accounting and the
accounting entries required prepare financial statements on that basis.
Much of the content of this chapter is new. However, it is an important
foundation for your future ACCA studies, in particular for Financial
Reporting.
2
Accruals basis of accounting
The accruals basis of accounting means that to calculate the profit for the
period, we must include all the income and expenditure relating to the period,
whether or not the cash has been received or paid or an invoice received.
Profit is therefore:
Income earned
$X
Expenditure incurred
$(X)
–––
Profit $X
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Accruals concept
The Conceptual Framework explains accruals accounting as ‘depicting
the effects of transactions and other events and circumstances on a
reporting entity’s economic resources and claims in the accounting
period(s) in which those effects occur’. This will be the case, even if
cash receipts and payments arise in different reporting periods.
The accruals concept is identified as an important accounting concept
by IAS 1 Presentation of Financial Statements as it provides a better
basis for assessing financial performance, rather than relying solely
upon information relating to cash receipts and payments.
Therefore all of the expenses involved in making the sales for a period
should be matched with the sales income and dealt with in the period in
which the sales themselves are accounted for.
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