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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Nila Pharma Ltd. recognised a trademark with an indefinite useful life. At the reporting date there is no indication of impairment, and the carrying amount is ₹12 crore. The audit manager says no test is needed that year because nothing suggests impairment. Which statement best reflects Ind AS 38?

The manager is wrong. An intangible asset with an indefinite useful life must be tested annually by comparing its recoverable amount with its carrying amount, even when no impairment indicator exists. The indicator-based test is an additional requirement, not a substitute for the annual test.

  1. AThe manager is correct, because testing depends only on indicators
  2. BThe manager is correct, because a trademark is amortised and not tested
  3. CThe manager is wrong; the recoverable amount must still be compared with the carrying amount annuallyCorrect
  4. DThe manager is wrong; the asset must be amortised over 10 years instead of testing

Explanation

Paragraph 108 requires the annual impairment test by comparing recoverable amount with carrying amount for an indefinite-life intangible, in addition to testing whenever an indication exists. Absence of an indicator therefore does not remove the annual test. An indefinite-life asset is not amortised, and no 10-year rule exists.

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