Hi,
I encountered a question on the CFA mock exam online below, and I just don’t understand why they are using only the opening carrying values for 2014 rather than the amortized amounts through that year, since the question is asking for the opening balance in 2015? I got $361 but th answer says it is $371 because it only uses the opening amortization values of 2014. Any help would be much appreciated!
Below are excerpts from a company’s intangible assets note for 2014:
($ millions)
Group 1
Group 2
Group 3
Group 4
Cost (opening)
840
320
118
96
Additions
76
–
7
–
Cost (ending)
916
320
125
96
Accumulated amortization & impairments (opening)
333
45
16
0
Amortization
–
15
8
–
Impairments
–
–
–
21
Accumulated amortization & impairments (ending)
333
60
24
21
Carrying amount
583
260
101
75
The 2015 opening carrying amount (in millions) of the company’s definite-life intangible assets is closest to:
$473.
$377.
$361.
INCORRECT> The definite-life intangibles are identifiable because they incur amortization and consist of the Groups 2 and 3 assets.
($ millions)
Group 2
Group 3
Cost (opening amounts)
320
118
Less: Accumulated amortization & impairments (opening amounts)
–45
–16
Carrying value
275
102
Total carrying value
377
I encountered a question on the CFA mock exam online below, and I just don’t understand why they are using only the opening carrying values for 2014 rather than the amortized amounts through that year, since the question is asking for the opening balance in 2015? I got $361 but th answer says it is $371 because it only uses the opening amortization values of 2014. Any help would be much appreciated!
Below are excerpts from a company’s intangible assets note for 2014:
($ millions)
Group 1
Group 2
Group 3
Group 4
Cost (opening)
840
320
118
96
Additions
76
–
7
–
Cost (ending)
916
320
125
96
Accumulated amortization & impairments (opening)
333
45
16
0
Amortization
–
15
8
–
Impairments
–
–
–
21
Accumulated amortization & impairments (ending)
333
60
24
21
Carrying amount
583
260
101
75
The 2015 opening carrying amount (in millions) of the company’s definite-life intangible assets is closest to:
$473.
$377.
$361.
INCORRECT> The definite-life intangibles are identifiable because they incur amortization and consist of the Groups 2 and 3 assets.
($ millions)
Group 2
Group 3
Cost (opening amounts)
320
118
Less: Accumulated amortization & impairments (opening amounts)
–45
–16
Carrying value
275
102
Total carrying value
377
Basically each column of values is supposed to move horizontally across, representing Group 1, 2, 3, and 4 of assets.