Hurtigruten Limited is a small company involved in the fishing industry. It operates a number of fishing boats and fishes mainly for tuna. The fish is processed and canned in its factory and the canned tuna is supplied to supermarkets around the country.
On 2 January 20X6 the company acquired a fishing licence at a cost of C600 000. The license has a legal life of four years with no residual value. The licence grants Hurtigruten Limited the right to fish for tuna in a demarcated area off the Western Cape coast. No other fishing company may fish for tuna in this area during the term of the licence. The financial director, a retired accountant, expensed the cost of the fishing licence on acquisition. The managing director (who has taken a keen interest inIFRS developments) has queried the expensing of the fishing licence:
No entries have been made in the accounting records relating to the fishing license during the current year.
Required:
Discuss the recognition, measurement and disclosure of the fishing license in the financial statements of Hurtigren Limited at 31 December 20X6, in terms of International Financial Reporting Standards.
