Tune It Limited, a fishing company located on the Western Cape, operates a number of fishing boats and fish for tuna. The tuna is then processed and canned in its factory and the finished product, is then supplied to supermarkets country wide. On the 2nd January 2022, the company acquired a fishing license at a cost of R1 500 000. The license has a legal life of five years with no residual value. The license gives Tune It Limited, the right to fish for tuna in certain areas off the Western Cape coast. No other company may fish for tuna in this area during the term of the license. The Financial Manager, who has joined the company and is new to this industry, expensed the cost of the acquisition of the fishing license. The Managing Director, has questioned the expensing of the license. The entity uses the cost model in accounting for intangible assets. REQUIRED: Discuss the recognition, measurement and disclosure of the fishing license in the financial statements of Tune It Limited at 31 December 2022, in terms of IAS 38, Intangible Assets.

Tune It Limited, a fishing company located on the Western Cape, operates a number of fishing boats and fish for tuna. The tuna is then processed and canned in its factory and the finished product, is then supplied to supermarkets country wide. On the 2nd January 2022, the company acquired a fishing license at a cost of R1 500 000. The license has a legal life of five years with no residual value. The license gives Tune It Limited, the right to fish for tuna in certain areas off the Western Cape coast. No other company may fish for tuna in this area during the term of the license. The Financial Manager, who has joined the company and is new to this industry, expensed the cost of the acquisition of the fishing license. The Managing Director, has questioned the expensing of the license. The entity uses the cost model in accounting for intangible assets. REQUIRED: Discuss the recognition, measurement and disclosure of the fishing license in the financial statements of Tune It Limited at 31 December 2022, in terms of IAS 38, Intangible Assets.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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