Asked by Craig Foreman on Jun 24, 2024
Verified
Amber Ltd. acquired Luna Ltd. in a business combination. One of the main reasons for the acquisition is that Amber wanted access to Luna's extensive customer list. The list is not recorded on Luna's books and has an estimated value of $100,000 and an estimated life of seven years. On Amber's consolidated statement of financial position, what value should be shown for Luna's customer list?
A) $0, since it was not recorded on Luna's books
B) $100,000 less any impairment losses
C) $100,000 less any accumulated amortization (calculated over five years) and any impairment losses
D) $100,000 less any accumulated amortization (calculated over seven years) and any impairment losses
Customer List
A record or database containing information about a business's customers, including their contact information, purchase history, and preferences.
Impairment Losses
Financial losses recognized when the carrying amount of an asset exceeds its recoverable amount.
Amortization
The systematic reduction of the value of an intangible asset over its useful life to reflect its declining value or the allocation of the cost of an intangible asset over a period of time.
- Recognize the amortization and impairment of intangible assets.
Verified Answer
In this scenario, since Luna's extensive customer list is an identifiable intangible asset with a value of $100,000 and an estimated life of seven years, it should be recognized and valued on Amber's consolidated statement of financial position. The customer list should be amortized over its useful life of seven years and reduced by any impairment losses. Therefore, the value shown for Luna's customer list on Amber's consolidated statement of financial position should be $100,000 less any accumulated amortization (calculated over seven years) and any impairment losses. Thus, the correct option is D.
Learning Objectives
- Recognize the amortization and impairment of intangible assets.
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