Financial Reporting · Ind AS 38 Intangible Assets

Ind AS 38: Subsequent Measurement, Amortisation and Indefinite Useful Life

Updated 5 October 2026 · Fact-checked

After recognition, Ind AS 38 lets you carry an intangible asset at cost less amortisation and impairment, or at a revalued amount if an active market exists. Finite-life assets are amortised over their useful life. Indefinite-life assets are not amortised but are tested for impairment every year and whenever there is an indication.

Understand Subsequent Measurement, Amortisation and Indefinite Useful Life

An intangible asset is a non-monetary asset without physical substance. Once it is recognised, Ind AS 38 asks two questions. How will you carry it in the books? And does its cost get spread over time?

You have two models. Under the cost model, the asset is carried at cost less accumulated amortisation and accumulated impairment losses. Under the revaluation model, it is carried at fair value at the revaluation date less later amortisation and impairment. Revaluation is allowed only if fair value is measured by reference to an active market. An active market is one where items traded are homogeneous, willing buyers and sellers can normally be found at any time, and prices are available to the public. Brands, newspaper titles, music and film publishing rights, and patents or trademarks are unique, so an active market is not expected for them. Licences such as taxi licences or fishing quotas may have one.

Next, you assess the useful life. It is either finite or indefinite. Useful life is indefinite when, after analysing all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Indefinite does not mean infinite. It means you cannot foresee an end.

A finite-life asset is amortised on a systematic basis over its useful life. Amortisation starts when the asset is available for use, that is, when it is in the location and condition needed to operate as management intends. The method must reflect the pattern in which future economic benefits are consumed. If you cannot determine that pattern reliably, use the straight-line method. The residual value of a finite-life asset is presumed to be zero unless a third party has committed to buy it at the end of its life, or there is an active market for it and it is probable that market will exist at the end of the life.

An indefinite-life asset is not amortised. Instead, you test it for impairment under Ind AS 36 every year and whenever there is an indication of impairment. You also review each period whether the indefinite-life view still holds. If not, the change to finite life is a change in accounting estimate under Ind AS 8, and the asset is tested for impairment.

Key rules to remember

Cost model carrying amount: Carrying amount = Cost − Accumulated amortisation − Accumulated impairment losses; Applies to all intangibles unless the revaluation model is chosen and an active market exists.
Revaluation model carrying amount: Carrying amount = Fair value at revaluation date − Later accumulated amortisation − Later accumulated impairment losses; Fair value must be measured by reference to an active market. Revalue regularly so the carrying amount does not differ materially from fair value.
Amortisable amount: Amortisable amount = Cost − Residual value; Residual value is presumed zero unless there is a third-party purchase commitment or an active market, as described above.
Straight-line amortisation: Annual amortisation = (Cost − Residual value) ÷ Useful life in years; Default method when the pattern of consumption cannot be determined reliably.
Units of production amortisation: Amortisation for the year = (Cost − Residual value) × Units produced in the year ÷ Total expected units; Use when benefits are consumed in line with output.
Rule: revaluation increase: Not a formula. Rule applied asset by asset: the increase is credited to OCI and accumulated in revaluation surplus.; Exception: to the extent the increase reverses a revaluation decrease of the same asset earlier charged to profit or loss, it is recognised in profit or loss.
Rule: revaluation decrease: Not a formula. Rule applied asset by asset: the decrease is charged to profit or loss.; Exception: to the extent the same asset has a revaluation surplus balance, the decrease is recognised in OCI and reduces that surplus.
Rule: indefinite life: Not a formula. No amortisation; impairment test annually and when there is an indication.; Compare carrying amount with recoverable amount under Ind AS 36. Review the indefinite-life assessment every period.
Rule: revenue-based amortisation: Not a formula. Presumed inappropriate, except in limited cases.; The presumption can be rebutted only when the intangible is expressed as a measure of revenue, or when revenue and consumption of economic benefits are highly correlated.

How to solve Subsequent Measurement, Amortisation and Indefinite Useful Life questions

Use the same sequence for any question on subsequent measurement of an intangible. It keeps your answer in provision-fact-conclusion order.

1Identify the model. Check whether the entity uses cost or revaluation. If revaluation, check that an active market exists. If not, the revaluation model is not allowed.
2Decide the useful life. Look for facts such as legal or contractual limits, renewal terms and cost of renewal, obsolescence, and competitor actions. Classify the life as finite or indefinite.
3If the life is finite, fix the start date. Amortisation begins when the asset is available for use, not when it is first used.
4Choose the method and residual value. Match the method to the consumption pattern (straight-line, diminishing balance or units of production). Take residual value as zero unless the exceptions apply.
5Compute amortisation for the period. Prorate for part years if the question gives dates. Add any change in estimate prospectively.
6If the life is indefinite, do not amortise. Compare carrying amount with recoverable amount (higher of fair value less costs of disposal and value in use) and book any impairment loss.
7If revaluation applies, compute the gain or loss against the carrying amount. Route it asset by asset between OCI (surplus) and profit or loss, and revalue the whole class of assets.
8State the conclusion with the journal entries or carrying amount at the reporting date.

Quickest way: Four-question check

When to use it: Use this when a case-scenario MCQ or a short written answer gives limited time.

Is there an active market? If no, only the cost model is available.
Is the life finite or indefinite? Indefinite means no amortisation but yearly impairment test.
For finite life: (Cost − Residual value) ÷ Life, prorated from the date available for use.
For revaluation, apply the rule asset by asset: an increase goes to OCI surplus and a decrease goes to profit or loss, except where it reverses an earlier opposite movement of the same asset (an increase reversing an earlier P&L decrease goes to P&L; a decrease goes to OCI to the extent of that asset's surplus).

Common mistakes in Subsequent Measurement, Amortisation and Indefinite Useful Life

Amortising an indefinite-life intangible
Students link every intangible with amortisation, as with depreciation of PPE.
Fix: Indefinite life means no amortisation. Test for impairment every year and whenever there is an indication.
Treating indefinite life as infinite life
The words sound alike.
Fix: Indefinite means no foreseeable limit to cash inflows. Review the assessment every period and treat any switch to finite as a change in estimate.
Revaluing a brand or patent because fair value is known
Students focus on the valuer's report and forget the active market condition.
Fix: The revaluation model needs an active market. Brands, patents and trademarks are unique, so an active market is not normally expected.
Starting amortisation when the asset is first used or when cash is paid
Students confuse payment, recognition and use.
Fix: Start when the asset is available for use, meaning it is in the condition needed to operate as management intends.
Assuming a non-zero residual value
PPE questions usually carry a scrap value.
Fix: For intangibles, residual value is presumed zero unless there is a third-party commitment to buy, or an active market that is probable at the end of life.
Applying a revaluation only to one asset in a class
Students treat each asset separately.
Fix: If one asset is revalued, all assets in its class are revalued, unless there is no active market for some of them. Those are carried at cost less amortisation and impairment.

Worked examples

Example 1

Case: Zenith Ltd acquired a software licence on 1 April 2026 for ₹60,00,000. It is available for use from 1 July 2026. Its useful life is 5 years, counted from 1 July 2026, the date it is available for use, with no renewal. A third party has not committed to buy it, and there is no active market. Benefits are consumed evenly. Zenith's year ends 31 March. Compute the amortisation for the year ended 31 March 2027 and the carrying amount on that date.

Show the solution

Life is finite: 5 years from the date available for use, with no renewal.
Amortisation starts when the asset is available for use, 1 July 2026, not 1 April 2026.
Residual value is zero: no third-party commitment and no active market.
Annual amortisation = ₹60,00,000 ÷ 5 = ₹12,00,000.
Period from 1 July 2026 to 31 March 2027 is 9 months. Amortisation = ₹12,00,000 × 9 ÷ 12 = ₹9,00,000.
Carrying amount at 31 March 2027 = ₹60,00,000 − ₹9,00,000 = ₹51,00,000.

Answer: Amortisation for the year is ₹9,00,000 and the carrying amount at 31 March 2027 is ₹51,00,000.

Example 2

Case: Meridian Ltd holds a trade licence for which an active market exists. It uses the revaluation model. At the start of year 1 the licence had a carrying amount of ₹40,00,000 and was revalued to its fair value of ₹50,00,000. Its remaining useful life from that date is 10 years, with no residual value. Meridian makes no transfer from revaluation surplus to retained earnings as the asset is used. At the end of year 1, after charging amortisation, fair value is ₹42,00,000. Show the accounting at the end of year 1.

Show the solution

Revaluation at start of year 1: increase = ₹50,00,000 − ₹40,00,000 = ₹10,00,000. It is credited to OCI and accumulated in revaluation surplus.
Amortisation for year 1 = ₹50,00,000 ÷ 10 = ₹5,00,000, charged to profit or loss. Carrying amount before year-end revaluation = ₹45,00,000.
Fair value at year end is ₹42,00,000. Decrease = ₹45,00,000 − ₹42,00,000 = ₹3,00,000.
The asset has a revaluation surplus of ₹10,00,000, so the decrease is recognised in OCI and reduces the surplus to ₹7,00,000. Nothing is charged to profit or loss for the decrease.
No transfer to retained earnings is made, so the surplus stays at ₹7,00,000. (Ind AS 38 allows the surplus to be transferred to retained earnings as the asset is used, but this is optional and not assumed here.)
Carrying amount at end of year 1 = ₹42,00,000. Amortisation from year 2 = ₹42,00,000 ÷ 9 remaining years = ₹4,66,667 (rounded).

Answer: Profit or loss bears amortisation of ₹5,00,000. The revaluation decrease of ₹3,00,000 goes to OCI, leaving a surplus of ₹7,00,000. Carrying amount at end of year 1 is ₹42,00,000.

Exam tips

In case-scenario MCQs, check the active market condition first. Many options are traps that revalue a brand or patent.
In written answers, state the provision, apply it to the facts, and then conclude. Show amortisation workings with the date the asset became available for use.
For indefinite-life assets, always mention both the annual impairment test and the yearly review of the indefinite-life assessment.
Write the OCI versus profit or loss routing for revaluation changes clearly, apply it asset by asset, and mention that the whole class is revalued.

Practice questions from Ind AS 38 Intangible Assets

Subsequent Measurement, Amortisation and Indefinite Useful Life in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Subsequent Measurement, Amortisation and Indefinite Useful Life: frequently asked questions

Is an intangible with indefinite useful life amortised under Ind AS 38?

No. It is not amortised. You test it for impairment under Ind AS 36 every year and whenever there is an indication of impairment. You also review each period whether events still support an indefinite life.

When can the revaluation model be used for intangibles?

Only when fair value can be measured by reference to an active market. Such markets are uncommon for intangibles. Brands, patents and trademarks are unique, so they usually cannot be revalued.

Which amortisation method does Ind AS 38 require?

The method must reflect the pattern in which the asset's future economic benefits are expected to be consumed. If the pattern cannot be determined reliably, use straight-line. Methods such as units of production are allowed when they match consumption.

Can I use a revenue-based method to amortise an intangible?

There is a rebuttable presumption that it is inappropriate. It can be used only when the intangible is expressed as a measure of revenue, or when revenue and consumption of economic benefits are highly correlated.