# Intangibles Examples xlsx CA Connect

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```							Example 1(a) - Amortisation

Patent purchased for R40 000 on 31/03/20x2. Patent allows Company A to manufacture
Vyronol from 31/03/20x2 - 31/03/20x5. Started producing Vyronol on 30/06/20x2.

Calculated the amortistion for the year ended 31/12/20x2.

40 000 ÷ 3 x (9 ÷ 12)
= 10 000

Example 1(b) - Amortisation

Patent purchased for R40 000 on 31/03/20x2. Patent allows Company A to manufacture
25 000 units of Vyronol. Started producing Vyronol on 30/06/20x2. By 31/12/20x2 had
produced 8 500 units.

Calculated the amortistion for the year ended 31/12/20x2.

40 000 ÷ 25 000 x 8 500
= 13 600
Example 2 - Amortisation, held for sale, impairment

Company B has 4 intangibles with the following attributes at 01/01/20x4:
Full year amortisation              Carrying amount
A               40,000                      200,000
B               60,000                      300,000
C               80,000                      400,000
D             100,000                       500,000

On 01/07/20x4:
A     Sold for R200 000.
B     Decided to sell within a year and met criteria to be held for sale.
Fair vaue less costs to sell = R250 000. Sold on 01/01/20x5.
C Legislation changed that outlawed the use of C stating that it could never
be used again.
Other information:
D Was not used from 15 Septemeber to 15 December 20x5.

Calculate the amortisation and other gains or losses relating to intangibles A to D.

Amortisation                    Gain / (loss)
A       40 000 x 6/12 = R20 000            20,000 (200 000 - 20 000)
B       60 000 x 6/12 = R30 000           (20,000) (300 000 - 30 000) - 250 000
C       80 000 x 6/12 = R40 000          (360,000) (400 000 - 40 000) - 0
D       100 000 x 12/12 = R100 000                -
Example 3(a) - Websites - SIC 32

Beta is developing a website that will enable customers to order the company’s products online,
instead of having to place an order telephonically or by mail.

It was decided to first undertake a feasibility study that cost R50 000.

In the next stage, hardware was purchased for R80 000, a domain name was obtained and
operating software was developed for R120 000. The developed applications were installed and

Once the above had been completed, the appearance of the web pages as improved by a graphic
designer who charged R15 000.

The content of the web site was then developed for R20 000.

The web site was launched on 1 July 20.4 (year-end 31/12/20.4) and during the next 6 months
graphics were updated and the web site was registered with new search engines at a cost of
R14 000.
Capitalise Expense
Planning stage                                                         50,000
Application and infrastructure development stage
- Hardware per IAS 16                           80,000
- Software and domain per IAS 38               120,000
Graphical design development stage                         15,000
Content development stage                                  20,000
Operating stage                                                        14,000
Totals                                                    235,000      64,000

Example 3(b) - Websites - SIC 32

Alpha Ltd is developing a web site to advertise the company’s products.

Determine the costs that should be expensed and those that should be capitalised.

All costs related to intangibles must be expensed.
Example 4 - Deferred tax (Own time)

Company D incurred development costs of R2 000 000 on 31/12/20x1.
Of these costs, R1 600 000 have been capitalised. The tax rate is 28%.
(a) For tax purposes, these costs can be deducted in the year they are incurred.
(b) For tax purposes the costs are deducted over 8 years.

Calculate the deferred tax asset or liability that will be shown in the Statement of Financial
Position as at 31/12/20x1.

CV            TB            TD          DT FP
(a)      1,600,000            -      1,600,000      448,000 cr
(b)      1,600,000    1,750,000        150,000       42,000 dr

Other profit and taxable income is R9 800 000.
Show how the above information will be shown in the Statement of Comprehensive Income
for the year ended 31/12/20x1.
(a)        (b)
Taxable income                           9,800,000  9,800,000
Development costs                       (2,000,000)  (250,000)
7,800,000  9,550,000
Current tax                              2,184,000  2,674,000

Statement of comprehensive income (extract)
Other income                         9,800,000   9,800,000
Development costs expensed            (400,000)   (400,000)
Net profit before tax                9,400,000   9,400,000
Tax expense                         (2,632,000) (2,632,000)
Current                (2,184,000) (2,674,000)
Deferrred                (448,000)     42,000
Profit after tax                     6,768,000   6,768,000
Other comprehensive income                   -           -
Total comprehensive income           6,768,000   6,768,000

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