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CMA Final · Corporate Financial Reporting · Intangible Assets (Ind AS 38)

Godavari Infotech Ltd has a licence with an indefinite useful life, carrying amount ₹50 lakh. At the year end an adverse regulatory ruling indicates it may be impaired. The company already performed its annual test three months ago. Under Ind AS 38, what must it do now?

The company must compare the licence's recoverable amount with its carrying amount now. Ind AS 38 requires impairment testing of indefinite-life intangibles annually and whenever an indication of impairment exists, so the adverse ruling triggers an additional test.

  1. AWait until next year's annual test
  2. BCompare recoverable amount with carrying amount now, since the indication triggers a test in addition to the annual testCorrect
  3. CAmortise the licence over its remaining term instead
  4. DIgnore the ruling as the annual test was done

Explanation

Ind AS 38 requires testing under Ind AS 36 annually and also whenever there is an indication of impairment. The adverse ruling is such an indication, so a fresh comparison of recoverable amount with carrying amount is required despite the earlier annual test.

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