Sample Questions
Question 1
Easy
Which of the following intangible assets is NOT subject to amortization under U.S. GAAP?
Solution
A is correct.
Under ASC 350, intangible assets with indefinite useful lives are not amortized. Instead, they are tested for impairment at least annually. A trademark that can be renewed indefinitely at minimal cost and is expected to generate cash flows indefinitely is classified as an indefinite-lived intangible.
Under ASC 350, intangible assets with indefinite useful lives are not amortized. Instead, they are tested for impairment at least annually. A trademark that can be renewed indefinitely at minimal cost and is expected to generate cash flows indefinitely is classified as an indefinite-lived intangible.
Question 2
Medium
Which costs are included in the depletable base of a natural resource?
Solution
A is correct.
The depletable base includes the acquisition cost, exploration and development costs, and the present value of any asset retirement (restoration) obligation, reduced by the expected residual value of the land. Extraction equipment is a separate depreciable asset, and restoration is included at present value, not its undiscounted total. See ASC 930, Extractive Activities, and ASC 410-20 on asset retirement obligations.
The depletable base includes the acquisition cost, exploration and development costs, and the present value of any asset retirement (restoration) obligation, reduced by the expected residual value of the land. Extraction equipment is a separate depreciable asset, and restoration is included at present value, not its undiscounted total. See ASC 930, Extractive Activities, and ASC 410-20 on asset retirement obligations.
Question 3
Hard
A nongovernmental NFP evaluates a vendor-hosted arrangement for software used in its operations.
Under U.S. GAAP, the conditions that establish a software license are:
Under U.S. GAAP, the conditions that establish a software license are:
Solution
C is correct. A hosted arrangement contains a software license when the customer can take possession at any time during hosting without significant penalty and can feasibly run the software itself or through an unrelated host. Both contractual access to the software and independent operating feasibility are required. Significant penalty includes substantial transfer costs or substantial loss of utility or value. ASC 350-40, Intangibles, Goodwill and Other, Internal-Use Software.
