Geek plc trades in the children's toys sector. During the year it acquired 100% of Gifted Ltd, a toy manufacturer for £3 million. Gifted's brand name is well known in the sector, allowing it to sell it products at premium prices. At the date of acquisition, a valuation of £1 million was placed on the brand name. Geek also purchased a brand name, Erudite, for £200,000. The brand relates to cheap electronic toys, mostly sold through Amazon. The directors of Geek believe they should recognise the brand in the financial statements and consider the brand to have an indefinite life. Geek has been trading for 20 years and, through extensive advertising, has built a well-known name in the industry which it wishes to recognise in the financial statements. An independent valuer has placed a valuation of £1.5 million on the brand. Discuss the main challenges in recognising and measuring intangible assets, such as brands, in an entity's individual statement of financial position. Explain whether the Gifted brand name will be recognised in the consolidated statement of financial position and why.
Geek plc trades in the children's toys sector. During the year it acquired 100% of
Gifted Ltd, a toy manufacturer for £3 million. Gifted's brand name is well known in
the sector, allowing it to sell it products at premium prices. At the date of acquisition,
a valuation of £1 million was placed on the brand name.
Geek also purchased a brand name, Erudite, for £200,000. The brand relates to
cheap electronic toys, mostly sold through Amazon. The directors of Geek believe
they should recognise the brand in the financial statements and consider the brand
to have an indefinite life.
Geek has been trading for 20 years and, through extensive advertising, has built a
well-known name in the industry which it wishes to recognise in the financial
statements. An independent valuer has placed a valuation of £1.5 million on the
brand.
Discuss the main challenges in recognising and measuring intangible assets, such
as brands, in an entity's individual
Explain whether the Gifted brand name will be recognised in the consolidated
statement of financial position and why.
Step by step
Solved in 2 steps
