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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Meghdoot Telecom Ltd holds a licence with an indefinite useful life, carried at ₹40 crore. There is no indication of impairment at the reporting date. Which statement is correct as per Ind AS 38 read with Ind AS 36?

An intangible asset with an indefinite useful life must be tested for impairment by comparing its recoverable amount with its carrying amount every year and also whenever there is an indication of impairment. The lack of any impairment indication does not exempt the entity from the annual test.

  1. ATest for impairment annually, and also whenever there is an indication of impairmentCorrect
  2. BTest only when an indication of impairment exists, since there is none now
  3. CTest every three years by comparing the asset's fair value with its cost
  4. DAmortise over 10 years and avoid any impairment test

Explanation

Under Ind AS 36 as referred to in paragraph 108, an intangible asset with an indefinite useful life must be tested by comparing recoverable amount with carrying amount annually and whenever there is an indication of impairment. Absence of an indication does not remove the annual test. A fixed 10-year amortisation is not prescribed for indefinite-life assets.

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