IAS 38 Contains Some Elements That Seem to Be Reactions

question 45

Multiple Choice

IAS 38 contains some elements that seem to be reactions to opportunistic behaviour by preparers of accounts and to the degree of uncertainty surrounding goodwill as an unidentifiable intangible asset.These elements include:

• A)the prohibition on recording internally generated goodwill.
• B)the requirement to use a specific rate of amortisation.
• C)the specification of impairment testing.
• D)the prohibition on recording internally generated goodwill and the specification of impairment testing.

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Definitions:

Operating Lease

A lease agreement allowing the use of an asset without transferring the risks and rewards of ownership, typically used for shorter-term leases or assets that are rapidly updated or replaced.

Sales-Type Lease

A lease agreement where the lessor recognizes profit or loss through the sale of an asset under lease as if it were a normal sale.

Residual Value

The estimated amount that an asset will be worth at the end of its useful life.

Perpetual Inventory System

The perpetual inventory system continuously updates inventory records for each purchase and sale, providing a real-time view of inventory levels.