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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Himalaya Broadcast Ltd. holds a broadcasting licence that management has concluded has an indefinite useful life. There are no indicators of impairment at the reporting date. Under Ind AS 38 read with Ind AS 36, what impairment testing is required for this asset?

The licence must be tested for impairment every year by comparing its recoverable amount with its carrying amount, and additionally whenever an indication of impairment arises. Absence of amortisation for an indefinite life asset does not remove this requirement.

  1. ATesting only when an indication of impairment exists
  2. BTesting every three years, since the life is indefinite
  3. CNo testing, because an indefinite life asset is not amortised
  4. DTesting annually by comparing recoverable amount with carrying amount, and also whenever there is an indication of impairmentCorrect

Explanation

Ind AS 38 requires an intangible asset with an indefinite useful life to be tested for impairment under Ind AS 36 by comparing recoverable amount with carrying amount annually and whenever there is an indication of impairment. Lack of amortisation makes annual testing more important, not unnecessary. Option A omits the annual test.

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