Lucy’s LTD was established in 2013 to sell Mexican food in three restaurants .innovative advertising
coupled with high quality food quickly established the name of Lucy’s at the forefront of restaurant
chains in southafrica.in 2015, it was decided to name the franchise Lucy’s and to register the name as a
trademark .the franchises are sold and fees of 5%of revenue are paid to Lucy’s LTD.
Which of the following statements are correct when Lucy’s Ltd determines whether the trademark
‘Lucy’s ‘can be recognized as an intangible asset in accordance with IAS 38?
-the trade mark should be controlled by Lucy’s Ltd.
– The trademark should be a result of a past event.
-Probable future economic benefits –i.e., the franchise fees-will flow to Lucy’s Ltd.
– The trademark has a cost, being the amount paid for registration.

—-Wiseman pharmaceuticals are in the process of developing a ‘miracle drug’ .if it is successful, a patent
on the drug will be registered. This will then be an internally generated intangible asset. Assuming the
patent is registered, which of the following statements are correct regarding intangible assets and
Wiseman’s patent?

The project should be divided into a research and a development phase.
Costs incurred in the research phase are recognized as an asset as it is probable that economic
benefits will flow to Wiseman.
Costs incurred in the research phase are expensed when incurred as Wiseman is unable to
demonstrate that it is probable that future economic benefits will flow to it.
The development phase costs are expensed when incurred if Wiseman is unable to demonstrate
that it is probable that future economic benefits will flow to it.
The development phase costs are recognized as an asset if Wiseman is able to demonstrate that
it is probable that future economic benefits will flow to it and all the recognition criteria are
met.
IAS 38 specifically states the internally generated assets may not be recognized as an asset.