Current Issues in Financial Reporting QUESTION - CASE STUDY
You are a qualified Chartered Accountant with Marvin Co. Ltd. a listed company that manufactures and distributes premium audio and visual equipment. The financial statements of Marvin are prepared up to 31 December each year in accordance with International Financial Reporting Standards (IFRS).
You encountered the following outstanding issues while preparing the financial statements for the year ended 31 December 2016:
Marvin purchased a customer list from the liquidator of a competitor on 1 July 2016. Marvin paid S4 million, which was based on the list having a useful life of two years. The Managing Director, Marcus commissioned a report on the value of the customer list from a firm of independent valuers on 31 December 2016.
The customer list was valued at $5 million by the independent valuer, who also estimated the asset had a total useful life of five years. Currently, the customer list is recorded as an intangible asset with a carrying value of $4 million. However, Marcus now wants the list to be revalued to the higher amount.
Required - Prepare a justification with reference to relevant IFRS of the accounting treatment suggested for each of the issues above, preparing supporting calculations and discussing the impact, where appropriate, on the consolidated statement of comprehensive income and the consolidated statement of financial position for Marvin Co. for the year ended 30 December 2016.