Answered: Do you think purchase of license to…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 12E

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Muscat Pharmaceuticals Ltd is located in Muscat, Oman and is part of the Pharmaceutical Manufacturing Industry. Muscat Pharmaceuticals Ltd has 300 employees at this location and generates 48.49 million in sales (USD). There are 2 companies in the Muscat Pharmaceuticals Ltd corporate family. The company has business base in the Gulf and Middle East counties for almost a decade. Several products are already registered in all the Gulf counties. These are being marketed directly or through its distributors. Its core competency is to move aggressively and satisfy increasing demand from our clients and becoming a preferred business partner. The company has a team of over 50 experienced scientists specializing in Formulation Development, Analytical development and Conducting Stability Studies. During February 2020, due to outbreak COVID-19 Pandemic, the company acquired five years license to manufacture N95 Mask from a foreign company at a cost of OMR 3,000. Due to the emergency situation, the company started the production immediately. It also purchased a small company called Sahid International which has a brand name in the production of hand sanitizers. The brand value of this company is estimated to be OMR 20,000. Muscat Pharmaceuticals Ltd also spent OMR 2,200 on advertisement during the first 4 months which has resulted a significant improvement in sales figure and is expected that it will continue for next 4 years. .i) Do you think purchase of license to manufacture N95 Mask can be recognised as intangible assets? Why or why not? If yes, how will you account the same as per the provision of IAS 38?

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