On 31 December 2018, Sela Plc acquired Lomo Plc which had a separately identified brand, valued at £7,600,000. In addition to this, SelaPlc also estimated at the end of 2019 that their own internally generated brand is worth £12,000,000.
A director has suggested that both figures should be recorded in the statement of financial position as intangible assets, as brands would strengthen their financial position.
Sela Plc is currently working towards a target gearing ratio in order to secure external funds for expansion. Both brands described have an indefinite life.
(maximum word count 120 words)
iii) Explain any two justifications for reporting brands as assets.(maximum word count 40 words)
Total 15 Marks