Skip to content

CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Kaveri Textiles Ltd. holds a licence-based brand with an indefinite useful life, which it has recognised as an intangible asset. The finance head asks when Kaveri must test this asset for impairment under Ind AS 38 read with Ind AS 36. Which approach is correct?

An intangible asset with an indefinite useful life must be tested for impairment every year and also whenever there is an indication that it may be impaired. The test compares recoverable amount with carrying amount under Ind AS 36. Neither the annual test nor the indicator-based test can be skipped.

  1. AOnly when there is an indication of impairment, because the asset is not amortised
  2. BAnnually, and also whenever there is an indication that the asset may be impairedCorrect
  3. COnly at the end of every third financial year
  4. DAnnually only, with no further test even if an impairment indicator arises during the year

Explanation

Paragraph 108 of Ind AS 38 requires an entity to test an intangible asset with an indefinite useful life for impairment by comparing recoverable amount with carrying amount, both annually and whenever there is an indication of impairment. Testing only on an indicator ignores the annual requirement. Testing only annually ignores the indicator-based test.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 38 Intangible Assets shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 38 Intangible AssetsFree diagnostic mock

More Ind AS 38 Intangible Assets questions