Question 1

Section A

BioGenetics acquired a patent on 1 January 20X3 for $100,000. The patent has a legal life of 15 years, but BioGenetics expects the product it protects to be obsolete in 10 years. On 31 December 20X4, an impairment review determined the recoverable amount of the patent was $75,000.

What is the carrying amount of the patent in the statement of financial position as at 31 December 20X4? (Enter the number only)

Accepted Answer

1. Calculate amortization over the shorter of legal or useful life. 2. Find carrying amount before impairment. 3. Compare with recoverable amount. The carrying amount is the lower of the two.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Amortizing over 15 years, or ignoring the impairment review.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 5

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