Intangibles, Tax, and Cash Flow Flashcards

Under IAS 38, which of the following development costs can be capitalised?

Answer: Costs that meet all six criteria including technical feasibility and intention to complete

IAS 38 requires all six development criteria to be met simultaneously before capitalisation is allowed.

Under IAS 12, current tax and deferred tax arising from items recognised in OCI should be:

Answer: Recognised in OCI

IAS 12 requires tax to follow the underlying transaction—if the item is in OCI, so is its tax.

Under IAS 7, the indirect method of presenting operating cash flows begins with:

Answer: Profit before tax, adjusted for non-cash items and working capital changes

The indirect method reconciles profit before tax back to operating cash flow by adding back non-cash charges and adjusting for working capital.

Under IAS 7, how are dividends paid classified in the cash flow statement?

Answer: Either as financing or operating activities (entity's choice, consistently applied)

IAS 7 allows dividends paid to be classified as financing (cost of capital) or operating (ability to pay from operations).

Under IAS 38, intangible assets with an indefinite useful life are:

Answer: Not amortised but tested for impairment annually

Indefinite-life intangibles are not amortised; instead they undergo annual impairment testing.

Under IAS 12, which of the following temporary differences does NOT give rise to a deferred tax liability?

Answer: Goodwill arising in a business combination

IAS 12 specifically prohibits recognising a deferred tax liability on goodwill arising from a business combination.