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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Kaveri Infra Ltd. holds a brand with an indefinite useful life, carried at ₹40 crore. No adverse event has occurred during the year and there is no indication of impairment. Under Ind AS 38 read with Ind AS 36, what is the entity required to do at year-end?

The entity must test the indefinite-life brand for impairment every year by comparing its recoverable amount with its carrying amount, and also whenever there is an indication of impairment. The absence of any impairment indicator does not remove the annual test requirement.

  1. ATest the brand for impairment annually by comparing recoverable amount with carrying amountCorrect
  2. BTest it only when an indication of impairment exists
  3. CAmortise it over a presumed maximum of 10 years
  4. DTest it every three years, since no impairment indicator exists

Explanation

Ind AS 38 requires an intangible asset with an indefinite useful life to be tested for impairment under Ind AS 36 annually and also whenever there is an indication of impairment. The absence of an indicator does not remove the annual test, so testing only on indication is wrong. Such an asset is not amortised.

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