Case Study 1A patent right is acquired by R Ltd from K Ltd in exchange ofmineral right. The mineral right is carried at Rs. 500 lacs inthe book of R Ltd.How should this transaction be measured and accounted forby R Ltd and K Ltd.? In K Ltd.’s books the patent is carriedat Rs. 10 lac which is not the fair market value.Case Study 2Sita Ltd purchased a Patent Right for Rs. 100 lacs. It hasbeen assessed that the useful life However, another Groupcompany intends to buy the patent after 5 years for 60% ofthe purchase price. Sita Ltd also intends to sell it after 5years.There exists active market for similar patent. Sita Ltd wishesto adopt revaluation model. It has observed that fair marketvalue of the patent at the end of Year 1 is Rs. 50 lacs.Suppose the use value of the asset under IAS 36 is Rs. 56lacs. i. At what cost should Sita Ltd recognize the patent initially? ii. If the entity adopts revaluation model, does it need to adopt an amortization policy? iii. If the answer to question (ii) is affirmative, what should be the useful life of the asset? iv. What should be the amortization for Year 1? v. How should the Sita Ltd account for the fair value at the end of Year 1?
Case Study 3Ramanuja Ltd is developing production process. During2007, expenditure incurred was Rs.100 million, of which Rs.70 million was incurred before 1 December 2007 andbalance Rs.30 million was incurred between 1 December2007 and 31 December 2007. The company demonstrated on 1 December 2007 that theproduction process met the criteria for recognition as anintangible asset in accordance with Para 57, IAS 38.The recoverable amount of know-how embodied in theprocess ( including future cash flows to complete the processbefore it is available for use) is estimated at Rs. 34 million.During 2008, Ramanuja Ltd incurred further expenditure ofRs.50 million. At the end of 2008, the recoverable amount ofknow-how embodied in the process ( including future cashflows to complete the process before it is available for use)is estimated at Rs.70 million. 1. What should be recognized as Intangible Asset? 2. How much should be expensed off? 3. What is the impairment Loss?