Infinite Life Intangible Assets | No Amortisation but Annual Impairment Test | Ind As Simplified

Infinite Life Intangible Assets | No Amortisation but Mandatory Impairment Test Under Ind AS 38, some intangible assets may be treated as having an indefinite useful life if management believes the asset will continue generating benefits for an unlimited period. Examples may include: Certain brands Trademarks Broadcasting rights Perpetual licenses What happens in accounting? Initially, the intangible asset is recorded at cost. If the entity follows the cost model, it continues to appear at cost. But there is one major point: Since the useful life is considered indefinite, the asset is not amortised. So students often ask: “If amortisation is not done, then how will reduction in value be captured?” The answer is: Mandatory Annual Impairment Testing Any intangible asset with an indefinite useful life must be tested for impairment every year, even if there is no indication of impairment. Normally, impairment testing is required only when indicators exist. But for: indefinite life intangible assets, and goodwill, annual impairment testing is compulsory. Purpose: Even if amortisation is not recorded, any fall in recoverable value should still get reflected through impairment loss. Quick Concept Summary Finite life intangible asset → Amortisation Indefinite life intangible asset → No amortisation + Annual impairment test #IndAS38 #AS26 #IntangibleAssets #Impairment #AccountingStandards #CAStudents #FR #FinancialReporting #CAFinal #AccountingConcepts #Amortisation #ImpairmentTesting #CommerceStudents #CAClasses #AccountingEducation