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Corporate Financial Reporting · Intangible Assets (Ind AS 38)

Retirements, Disposals and Disclosures of Intangible Assets under Ind AS 38

Updated 11 October 2026 · Fact-checked

Under Ind AS 38 you derecognise an intangible asset on disposal or when no future economic benefits are expected from its use or disposal. Gain or loss = net disposal proceeds − carrying amount. Recognise it in profit or loss, and never classify the gain as revenue. Then disclose by class.

Understand Retirements, Disposals and Disclosures

An intangible asset stays on the balance sheet only while it can still give you economic benefits. Once you sell it, or expect nothing more from using or selling it, you remove it. This removal is called derecognition.

According to paragraph 112, an intangible asset is derecognised (a) on disposal, or (b) when no future economic benefits are expected from its use or disposal. Disposal can happen by sale, by entering into a finance lease, or by donation (paragraph 114).

The gain or loss is the difference between the net disposal proceeds, if any, and the carrying amount. It goes to profit or loss when the asset is derecognised. Gains are not classified as revenue (paragraph 113). The consideration is measured using the transaction price rules of Ind AS 115 (paragraphs 47-72). Later changes in that estimate follow the Ind AS 115 rules on changes in transaction price (paragraph 116).

The date of disposal is the date the recipient obtains control, tested using the Ind AS 115 rules on when a performance obligation is satisfied (paragraph 114). A sale and leaseback follows Ind AS 116.

Two more points matter. Amortisation of a finite-life asset does not stop just because you stop using it. It stops only when the asset is fully amortised or is classified as held for sale under Ind AS 105 (paragraph 117). Finally, Ind AS 38 requires disclosures by class of intangible assets, separating internally generated from other intangibles (paragraph 118).

Key rules to remember

Gain or loss on derecognition
Gain / (Loss) = Net disposal proceeds − Carrying amount
Carrying amount = cost (or revalued amount) − accumulated amortisation − accumulated impairment. Recognise in profit or loss; gains are not revenue.
Derecognition triggers
Derecognise on (a) disposal, or (b) no future economic benefits expected from use or disposal
Paragraph 112. If nothing is received, the whole carrying amount is a loss.
Amortisation until disposal
Amortisation continues until fully amortised or classified as held for sale (Ind AS 105)
Idle or unused does not stop amortisation of a finite-life asset.
Replaced part
Derecognise carrying amount of the replaced part when the replacement cost is capitalised
If the carrying amount of the replaced part cannot be determined, the cost of the replacement may be used as an indication of its original cost.
Reacquired right reissued
Use the related carrying amount, if any, to determine gain or loss on reissue
Applies to a reacquired right in a business combination later sold to a third party.

How to solve Retirements, Disposals and Disclosures questions

Use this sequence for any disposal or retirement problem. Work in order so you do not miss the amortisation up to the date of disposal.

  1. 1Identify the asset and the event: sale, finance lease, donation, or retirement with no expected benefits.
  2. 2Fix the date of disposal, which is when the buyer obtains control.
  3. 3Compute the carrying amount at that date: cost less accumulated amortisation and impairment. Amortise up to the disposal date, including the part-year.
  4. 4Determine the net disposal proceeds using the Ind AS 115 transaction price rules. Deduct selling costs.
  5. 5Compute gain or loss = net proceeds − carrying amount.
  6. 6Pass the entry: remove cost and accumulated amortisation, record cash or receivable, and take the gain or loss to profit or loss, not revenue.
  7. 7If the question asks for disclosure, present the reconciliation and class-wise details required by paragraph 118.

Quickest way: Carrying amount first, then proceeds

When to use it: Use this in MCQs and short numerical questions where time is tight.

  1. Write cost, then subtract amortisation up to the disposal date only.
  2. Subtract any impairment already recognised.
  3. Subtract the carrying amount from net proceeds.
  4. Positive result is a gain, negative is a loss. Both go to profit or loss.
  5. For a retired asset with no proceeds, the loss equals the carrying amount.

Common mistakes in Retirements, Disposals and Disclosures

  • Showing a gain on sale of an intangible asset as revenue.

    Students link sales with revenue.

    Fix: Paragraph 113 says gains shall not be classified as revenue. Show it as a gain in profit or loss.

  • Using the full-year amortisation or ignoring amortisation up to the disposal date.

    Students compute the carrying amount at the last balance sheet date.

    Fix: Amortise up to the date the buyer gets control, then compute the carrying amount.

  • Stopping amortisation because the asset is idle.

    Confusion with the idea that amortisation reflects use.

    Fix: Under paragraph 117 amortisation of a finite-life asset continues unless it is fully amortised or held for sale under Ind AS 105.

  • Ignoring derecognition when the asset is abandoned with no sale.

    Students think derecognition needs a buyer.

    Fix: Paragraph 112(b) triggers derecognition when no future benefits are expected. Write off the carrying amount as a loss.

  • Omitting the internally generated versus other split in disclosures.

    Students list only totals by class.

    Fix: Paragraph 118 requires disclosure by class, distinguishing internally generated from other intangible assets.

Worked examples

Example 1

Alpha Ltd bought a software licence on 1 April 2023 for ₹12,00,000, with a useful life of 5 years, straight-line, nil residual value. It sold the licence on 31 March 2026 for ₹6,00,000, with selling costs of ₹20,000. Compute the gain or loss on derecognition.

Show the solution
  1. Annual amortisation = ₹12,00,000 ÷ 5 = ₹2,40,000.
  2. Period from 1 April 2023 to 31 March 2026 is 3 years. Accumulated amortisation = ₹2,40,000 × 3 = ₹7,20,000.
  3. Carrying amount = ₹12,00,000 − ₹7,20,000 = ₹4,80,000.
  4. Net disposal proceeds = ₹6,00,000 − ₹20,000 = ₹5,80,000.
  5. Gain = ₹5,80,000 − ₹4,80,000 = ₹1,00,000.

Answer: Gain of ₹1,00,000, recognised in profit or loss and not classified as revenue.

Example 2

Beta Ltd holds a brand-related licence with cost ₹10,00,000 and accumulated amortisation ₹6,00,000 and no impairment. On 31 March 2026 management decides to abandon it because no future economic benefits are expected from use or disposal. No proceeds are expected. State the accounting treatment.

Show the solution
  1. Paragraph 112(b) applies: no future economic benefits expected from use or disposal.
  2. Carrying amount = ₹10,00,000 − ₹6,00,000 = ₹4,00,000.
  3. Net disposal proceeds = nil.
  4. Loss = nil − ₹4,00,000 = ₹(4,00,000).
  5. Entry: Accumulated amortisation Dr ₹6,00,000; Loss on derecognition (profit or loss) Dr ₹4,00,000; To Intangible asset ₹10,00,000.

Answer: Derecognise the asset and recognise a loss of ₹4,00,000 in profit or loss.

Exam tips

  • In numericals, compute the carrying amount at the disposal date first. Most lost marks come from wrong amortisation.
  • Quote the trigger: disposal or no future benefits expected. Examiners reward this in theory answers.
  • For MCQs, remember gains are not revenue and amortisation continues when an asset is idle.
  • In disclosure questions, structure your answer by class and show the reconciliation items from additions to other changes.
  • For Ind AS 38 versus AS 26 questions, state only differences you are sure of and keep the Ind AS reference points to the paragraphs you know.

Practice questions from Intangible Assets (Ind AS 38)

Retirements, Disposals and Disclosures in other exams

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

Retirements, Disposals and Disclosures: frequently asked questions

When is an intangible asset derecognised under Ind AS 38?

It is derecognised on disposal, or when no future economic benefits are expected from its use or disposal. Disposal may be by sale, finance lease or donation.

How is the gain or loss on disposal of an intangible asset calculated?

It is the difference between net disposal proceeds, if any, and the carrying amount of the asset. You recognise it in profit or loss when the asset is derecognised. Gains are not classified as revenue.

Does amortisation stop when an intangible asset is no longer used?

No. Amortisation of a finite-life asset continues unless the asset is fully amortised or classified as held for sale under Ind AS 105.

What must be disclosed for intangible assets under Ind AS 38?

For each class, distinguishing internally generated from other intangibles, you disclose useful lives or rates, amortisation methods, gross carrying amount and accumulated amortisation, the profit or loss line item for amortisation, and a reconciliation of opening to closing carrying amount.