Question

Bega Cheese Limited acquired the trade dress (i.e. the packaging labels) of Kraft Food for peanut better with an advertising campaign slogan of “Same recipe, same great taste. Now Aussie owned by Bega.” The expected market shares obtain by this trade dress is $60 million.

Question

Discuss whether these trade dresses would be recognised as intangible assets on Bega Cheese Limit’s balance sheet in terms of definition and recognition criteria and prepare the journal entries where necessary.

Answer 1

before recognizing this as an intangible asset, let's look at the criteria of an intangible asset.

definition: an intangible asset is an asset that is recognized in the financial statement after meeting certain criteria. an intangible asset is not physical in nature.some of the example of an intangible asset is goodwill, trademark, etc

recognition criteria of intangible assets.

• probable that the expected future economic benefits that are attributed to the asset will flow to the entity.
• reliability

in the above case, the cashflow is probable and can be measured with reliability.so, it satisfies the recognition criteria of intangible assets. let's look at the journal entry.

journal entry

cash a/c dr 60

to trade dress 60