accounting question – ias 38 -ifrs 3?

Question by bussiness_hotshot: accounting question – ias 38 -ifrs 3?
The following info relates to Rockmedia plc, a media and entertainment company for the year to 31st Match 2007

1) the company acquired the copyrights to the original recordings of a heavy metal band for £5M

2)The company experience a 60% growth in sales in of its internally developed music magazines and considers the fair value of the masthead of this publication to be £21M

3) The company acquired SynFilms Ltd for £47m. The main purpose of this acquisiton was to secure Synfilms film library which Rockmedia considers to be worth £42M.
The remaining tangible net assets of SynFilms are valued at £2M

4) The company purchased a broadcasting license which is renewable every 10 years for £50M. The cost of renewing such a license is negligible and the company has held a number of similar licenses for a long time which have always been renewed,

Applying IAS 38 and IFRS 3 discuss how the above information should be reflected in the annual report and accounts of Rockmedia Plc.

Best answer:

Answer by prince_dag
1) Copy rights are an Intangible asset. The £5m should be capitalised and amortised over its useful life or stated at fair value and reviewed for impairment.

2)Internally generated intangibles are normally not capitalised. Its usually when one company acquires another company that the internally generated intangibles are recognised on consolidation.

3)As in 2 above, the on calculating the goodwill on acquisition, Rockmedia will adjust the calculation to take into account the fair value of Synfilms film library worth £42.

4)The broadcasting license should be capitalised as an intangible. As the license is renewable after 10 years and similar licenses have been renewed without a problem, then amortisation is not necessary. instead it should be reviewed for impairment annually.

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