In Order to Determine Whether or Not Expenditure Should Be

question 3

Multiple Choice

In order to determine whether or not expenditure should be treated as an intangible asset,the relevant test to apply in Australia is:

• A) It should be recognised when (a) it is definite that future economic benefits will eventuate or (b) the asset possesses a cost or other value that can be measured reliably.
• B) It should be recognised if (a) the expenditure is with an external party in an arm's length transaction for a separately identifiable intangible asset or (b) the intangible asset arises as the difference between the net tangible assets of an entity and the price paid for that entity.
• C) It should be recognised if (a) it is part of a specified plan by management to develop and maintain a separately identifiable asset or (b) the intangible asset was purchased in an arm's length transaction and is actively traded in a market.
• D) It should be recognised when and only when (a) it is probable that future economic benefits will eventuate and (b) the asset possesses a cost or other value that can be measured reliably.

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Definitions:

Duty to Inform

The legal obligation of one party to provide relevant information to another party in certain circumstances, such as in contracts or advisory relationships.

Law of Agency

A legal doctrine concerning the relationship where one party, the agent, is authorized to act on behalf of another, the principal, in transactions with third parties.

Mental Capacity

An individual's cognitive ability to understand, make, and communicate informed decisions regarding personal or legal matters.

Duty of Loyalty

A legal and ethical obligation requiring individuals, particularly directors and officers of a corporation, to act in the best interests of the corporation and its shareholders.