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. Outline the accounting for intangible assets with an indefinite life and whether the Erudite brand can be regarded as having an indefinite life. Explain whether Geek is allowed to recognise its own brand in the financial statements.
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.
Outline the accounting for intangible assets with an indefinite life and whether the
Erudite brand can be regarded as having an indefinite life.
Explain whether Geek is allowed to recognise its own brand in the financial
statements.
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