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CMA Final · Corporate Financial Reporting · Intangible Assets (Ind AS 38)

Nirmaan Software Ltd has a licence for a brand with an indefinite useful life, carried at Rs 80 lakh. No impairment indicators exist at the year end. Under Ind AS 38, read with Ind AS 36, what must the entity do?

The entity must compare the recoverable amount with the carrying amount of the indefinite-life intangible every year, and also whenever there is an indication of impairment. Absence of impairment indicators does not remove the annual test requirement.

  1. ATest it for impairment annually and also whenever there is an indication of impairmentCorrect
  2. BTest it only when an indication of impairment exists
  3. CAmortise it over 10 years and test only on indication
  4. DTest it every three years by comparing fair value with cost

Explanation

For an intangible asset with an indefinite useful life, the recoverable amount is compared with the carrying amount annually and whenever there is an indication of impairment. Testing only on indication is wrong because the annual test is required even when no indicators exist.

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